Director of Research at the Institute of Economic Affairs (IEA), Dr. John Kwabena Kwakye, has proposed adopting the dollar as Ghana’s currency to stabilize the economy.
“Stabilising the economy is not rocket science. If we feel we cannot maintain the Cedi, let us abandon it and adopt the dollar. Let us dollarise the economy,” he said.
“Dollarisation” is when a country begins to recognize the U.S. dollar as a medium of exchange or legal tender alongside or in place of its domestic currency.
Dr. Kwakye suggested that dollarization should be a temporary measure until the economy rebounds, after which Ghana can reintroduce its currency.
Dollarization occurs when a country recognizes the U.S. dollar as legal tender alongside or instead of its domestic currency due to instability.
Advantages include lower administrative costs and a sounder financial sector, while disadvantages include loss of monetary autonomy and vulnerability to foreign influence.
He also proposed converting the central bank into a currency board, where the local currency is pegged to a foreign reserve currency, allowing for a fixed exchange rate.
Dr. Kwakye criticized the government for failing to implement alternative strategies, opting instead to collateralize assets for loans under the IMF program, limiting policy flexibility.
He expressed concern over recent exits of foreign companies from Ghana, such as Glovo and reports about Société Générale (SG) Ghana, citing the loss of competitiveness and its adverse impact on the economy.
In response, Mr. Yaw Sampah, a private legal practitioner and finance analyst, disagreed with Dr. Kwakye’s proposal to dollarize the economy.
He advocated for policies to diminish the dollar’s significance in Ghana, aiming to reduce speculative demand and promote the use of the local currency.
Mr Sampah emphasized the need to discourage dollar pricing in various sectors, suggesting that the dollar should only be used for international transactions to strengthen the local currency’s value.