Ghanaian Vice President, Mahamudu Bawumia, says he will adopt a new exchange rate regime that links the Cedi currency to gold if he wins presidential elections in December 2024.
“I would like to propose a new foreign exchange regime management act for Ghana next year [2025] in which the value of the Cedi will be anchored to gold,” Bawumia said recently.
The move will enhance exchange rate stability, he said.
Following the geo-political tensions that have battered their currencies and fanned inflation, African nations are rushing to build their gold reserves to shore up exchange rates. Ghana joins several African nations, including:
Uganda
South Sudan
Nigeria, and
Madagascar
which are either shoring up their gold holdings or considering doing so to protect their currencies and fight inflation.
REPORT | Bank of Uganda to Buy Gold Locally to Boost Declining Foreign Reserves and Buffer Against ‘International Financial Markets Risks’
The gold purchase program, amongst other measures, is projected to reduce imports of raw gold, contributing to the reduction in total… pic.twitter.com/CYgytrWh22
— BitKE (@BitcoinKE) July 16, 2024
Ghana’s move however will be the one to follow the footsteps of Zimbabwe, which has backed the currency with gold, effectively adopting a gold standard.
Zimbabwe overhauled its currency regime in April 2024, adopting a gold-backed unit, the ZiG, short for Zimbabwe Gold to replace its defunct local dollar. That was after the depreciation of the Zimbabwean dollar to the U.S. currency reached 80% this year [2024], having lost value every single trading day.
Zimbabwe’s central bank has introduced a new ‘structured currency’ supported by gold, aiming to address rampant inflation and bring stability to the country’s struggling economy.
Zimbabwe’s Reserve Bank governor, John Mushayavanhu, announced in Harare on April 5 2024 that the… pic.twitter.com/ojU4ZLAbEq
— Tp (@QFs_Global) April 8, 2024
Anchoring a currency to gold means that the value of the currency is directly tied to a specific amount of gold. This concept is known as the gold standard, for instance, Zimbabwe’s Zig is backed by $370 million worth of reserves in gold.
Under the gold standard, a country’s currency is backed by its gold reserves, and the government or central bank guarantees that it can exchange a specific amount of gold for the equivalent amount of currency.
The presidential candidate of the New Patriotic Party will face off with former president and main opposition leader, John Dramani Mahama of the National Democratic Congress, in this year’s [2024] elections.
CBDC | Blockchain Solutions Platform, Gluwa, Meets Vice President of Ghana as it Explores Providing Adoption Support for the #eCedi CBDC
The meeting follows other similar developments in Nigeria, where Gluwa recently began working with the Central Bank of Nigeria as an… pic.twitter.com/Mgt12W9N13
— BitKE (@BitcoinKE) March 22, 2024
President Nana Akufo-Addo is stepping down after his second and final four-year term.
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