Will A Gold-backed New Cedi Ever Be Possible ...

Sat, 14 Jul 2012 Source: Thompson, Kofi

In The Republic Of Ghana?

By Kofi Thompson

After the financial crisis of 2008, it was said by analysts and academics with expertise in economics, that the old economic certainties no longer held true - and that the only certainty was uncertainty.

It is a dictum that still holds true - as can be seen in the Euroland debt crisis, and the International Monetary Fund's (IMF) gloomy global economic outlook.

It is because the old certainties no longer apply that an acquaintance and I took it upon ourselves to listen to, and read, public pronouncements on the economy by the New Patriotic Party's (NPP) last-word in economics, Dr. Bawumia - from the time he was picked to be the running mate of the party's presidential candidate, Nana Addo Danquah Akufo-Addo, to date.

At this point in that tracking exercise, alas, l shall have to agree with my acquaintance, who insists that Dr. Bawumia talks like a man who forgets that the old certainties no longer apply. He is not impressed by him at all, alas.

There has been occasion when some of the members of his party have mentioned the redenomination of the cedi, for example, as one of the "achievements" of his time at the Bank of Ghana.

Well, I remember poking fun at President Kufuor, when he proudly boasted that the new Ghana cedi had parity with the U.S. dollar - and saying to my acquaintance that a new currency used in an economy with the kind of structural imbalances ours was lumbered with, would soon experience a crisis of confidence - and fall freely.

It was not long before Kufuor & Co. were raiding our foreign reserves for cash in hard currency to shore it up. Daft. Millions of dollars was spent in that exercise in futility. And I actually had an interesting dream once, around that time, as it happens.

In it, I remember wondering to myself, what would have been the outcome, if the bright sparks at the Bank of Ghana (where Bawumia was serving as Deputy Governor, incidentally) had thought outside the box - in an age of uncertainty - and instead of recommending redomination and the issuance of a new currency, rather dared to recommend the adoption of the U.S. dollar as a transition currency for Ghana - or, better still, asked Kufuor & Co. to link the new Ghana cedi with gold: and made our nation one on the gold standard with a gold-backed Ghana cedi.

Would that not have been a sure-fire means of ensuring stable value for money - with all its attendant benefits, I ask? Perhaps the question we must ask is: In a nation with a political class not famous for imaginative thinking, will adopting the gold standard and having a gold-backed Ghana cedi, ever be possible in the Republic of Ghana?

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Columnist: Thompson, Kofi