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BusinessFortify the cedi's value with our natural resources - IEA tells gov't

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Fortify the cedi’s value with our natural resources – IEA tells gov’t

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The Director of Research at the Institute of Economic Affairs (IEA), Dr. John Kwakye, has urged the government to explore avenues for acquiring full ownership of Ghana’s natural resources to use them as backing for the Cedi, thereby strengthening its value.

Dr. Kwakye highlighted that leveraging resources like gold to support the Cedi could elevate it to one of the most robust trading currencies globally, especially as the government seeks solutions to combat the currency’s devaluation.

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Several trade unions and associations have expressed concerns about the depreciation of the Cedi, citing its negative impact on their businesses.

Currently, the dollar is trading at GH¢14.90 on the forex market, a significant increase from the GH¢10.97 rate observed in the same period in May 2023.

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According to Bloomberg, the Cedi’s depreciation is being worsened by a decrease in cocoa earnings, with exports declining by approximately $500 million in January and February 2024 due to adverse weather conditions and the swollen shoot disease.

Speaking on the Citi Breakfast Show with host Bernard Avle on Wednesday, Dr. Kwakye argued that relying on external support to strengthen the Cedi and the economy is not sustainable, as shortfalls often occur and are typically negative.

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“The underlying fundamental structure of the economy hasn’t changed and I have always said that relying on external loans to support your currency is not sustainable because you will eventually have to pay back and when you begin paying back, there will be outflows and so it looks like we are now just waiting for the IMF’s $360 million to be stronger for a while and return to our struggling state.

“The Cedi is vulnerable and we can only stop the fall temporarily and the depreciation will resume again.”

“Your reserves support your currency and so our national reserves support the Cedi and so wherever your reserves are coming from, for example, in gold, what we need to understand is that we need to own our own reserves of gold and we need to take ownership and increase the reserves.

“If we take ownership of our resources, we can use them to back our currency to strengthen it,” the economist added.

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