Ghana’s Bawumia to Link Cedi to Gold If Elected President

(Bloomberg) -- Ghana’s Vice President Mahamudu Bawumia said he will adopt a new exchange rate regime that links the cedi currency to gold if he wins presidential elections in December.

“I would like to propose a new foreign exchange regime management act for Ghana next year in which the value of the cedi will be anchored to gold,” Bawumia said in the capital, Accra, on Thursday. The move will enhance exchange rate stability, he said. 

If it happens, Africa’s top gold producer would become the first country in the region to follow Zimbabwe in backing its local unit with gold. 

Zimbabwe overhauled its currency regime in April, adopting a gold-backed unit, the ZiG, short for Zimbabwe Gold to replace its defunct local dollar. That was after the depreciation of the Zimbabwean dollar to the US currency reached 80% this year, having lost value every single trading day.

Following the geopolitical tensions that have battered their currencies and fanned inflation, African nations are rushing to build their gold reserves to shore up exchange rates. Nations from Ghana, South Sudan, Zimbabwe and Nigeria have either taken steps to shore up their holdings of gold or are considering doing so.

The cedi weakened 0.1% on Thursday to a record low of 15.5577 per dollar at 4:45 p.m. in the capital, Accra. From the beginning of the year, the currency was down 23.3% to the greenback, making it the world’s fifth-worst performer among those tracked by Bloomberg.

Currency weakness has been a key driver of Ghana’s inflation that has brought economic pain to both households and businesses. Consumer costs growth stood at 22.8% in June, which the central bank is fighting to bring into its target band of 6% to 10%.

Bawumia, who was speaking at the opening ceremony of Ghana’s maiden gold refinery said he will cut withholding tax to 1% from 1.5% when he becomes president in 2025 to ease the economic hardship of companies.

The presidential candidate of the New Patriotic Party will face off with former president and main opposition leader John Dramani Mahama of the National Democratic Congress in this year’s elections. President Nana Akufo-Addo is stepping down after his second and final four-year term.

--With assistance from Ray Ndlovu and Yinka Ibukun.

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