The Institute of Economic Affairs (IEA) has expressed surprise about the reasons behind the introduction of the Bank of Ghana’s Ghana Gold Coin (GGC), arguing, that the Bank of Ghana should find permanent solutions to the perennial instability of the cedi to the dollar.
The Central Bank recently suggested that the GCC could be an alternative store of value to the dollar, which appears to be in high demand, straining the cedi/dollar exchange rate.
The IEA in a statement said “We find the BoG’s reasons for introducing the GCC, however, to be surprising. We are wondering why the Bank will offer an alternative asset to Ghanaians to hold with the hope of easing pressure on the dollar instead of finding a solution to the reasons why Ghanaians prefer to hold the dollar instead of the cedi, which includes high inflation, persistent economic crisis and lack of confidence in the economy”.
“Offering the GCC as an alternative asset to the dollar seems to be an admission of failure to deal with the real problems facing the economy, and which drive Ghanaians to hold dollars instead of cedis”, it added.
The IEA continued that the liquidity-management reason for introducing the GCC looks equally perplexing.
“The Bank is expected to buy gold from miners with cedis. The Bank arranges for the gold to be minted into the GCCs. The Bank then sells the GCCs back to Ghanaians in exchange for the cedis it injected into the economy in the first place when it bought gold. Therefore, the GCCs sale eventually results in zero liquidity withdrawal from the economy on a net basis, contrary to the claim by BoG that it amounts to liquidity management”, he mentioned.
The IEA urged the Central Bank to focus on dealing with the fundamental causes of the cedi depreciation and the growing appetite of Ghanaians to hold dollars instead of resorting to the GCC.
The required measures, it added, should include maintenance of fiscal and monetary discipline to reduce pressures on the cedi.