IEA Suggests Ghana Abandons Cedi For Dollars To Stabilise Economy, Other Analysts Reject Idea

IEA Suggests Ghana Abandons Cedi For Dollars To Stabilise Economy, Other Analysts Reject Idea

  • Institute of Economic Affairs (IEA) has proposed that Ghana adopt the dollar to stabilise the economy
  • According to the Director of Research at IEA, Dr John Kwabena Kwakye, this should be a temporary measure to stabilise the economy
  • But other analysts, including ASEPA, have rejected this proposal

The Director of Research at the Institute of Economic Affairs (IEA), Dr John Kwabena Kwakye, has suggested that Ghana adopt the dollar to stabilise the economy.

His comment comes on the back of a volatile cedi, which has suffered a massive depreciation against the dollar in the past weeks.

IEA Suggests Ghana Abandons Cedi For Dollars To Stabilise Economy, But Other Analysts Reject Idea
The IEA says dollarising the economy is a stopgap to stabilising the economy.
Source: Getty Images

The government and the Bank of Ghana have been struggling to stabilise the cedi against the dollar leading to rising inflation and a higher cost of doing business, among other things.

According to Dr Kwakye, if the government and the central bank cannot maintain the cedi, they should abandon it and adopt the dollar instead.

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Adopting the dollar means Ghana would have to either abandon the use of the cedi entirely for the dollar or use the dollar and the cedi interchangeably.

Dr Kwakye said this should be a stopgap to fix the destabilised economy until it rebounds.

He also suggested that the cedi be pegged to a foreign currency, preferably the dollar, and the central bank be converted into a currency board to promote economic stability.

Under this model, the currency board will rely on supply and demand to issue notes and coins and provide fixed-rate conversions to the reserve currency.

Analysts, and CSOs disagree

However, Mensah Thompson, the Executive Director of the Alliance for Social Equity and Public Accountability (ASEPA), disagreed with dollarising the Ghanaian economy.

According to him, the major problems destabilising the cedi are due to the government's reckless borrowing and a lack of understanding of economic management.

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He said the current state of the economy should be blamed on the former Finance Minister, Ken Ofori-Atta, the Governor of the Bank of Ghana, Ernest Addison and President Akufo-Addo.

He said the economic restructuring carried out by the Akufo-Addo administration has exacerbated the country's situation, throwing it into a debt hole.

Meanwhile, a finance analyst, Yaw Sampah, has suggested that rather than dollarising the economy, the laws concerning the use of the dollar in Ghana must be strictly enforced.

He explained that some Ghanaians continue to price their goods and services in dollars, further destabilising the local currency.

Ghana to become the first blockchain-powered government in Africa

YEN.com.gh reported that Vice President Dr Bawumia says Ghana will soon become the first blockchain-powered government in Africa.

He said public sector corruption will be curbed by incorporating blockchain technology into Ghana's governance structure.

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This technology will follow the rollout of the e-Cedi, which the vice president believes would help the country fight financial crimes.

Proofreading by Berlinda Entsie, journalist and copy editor at YEN.com.gh

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Source: YEN.com.gh

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