Dr. Mahamudu Bawumia, Visiting Professor of Economic Governance at the Central University College and Former Deputy Governor of the Bank of Ghana has urged the Bank of Ghana to reverse measures rolled out to stem the downward spiral of the cedi saying dollarization is not the cause of depreciation but rather the effect of weak economic fundamentals and the loss of confidence in the cedi. According to him, any attempt to solve the rapid depreciation of the cedi by focusing on de-dollarization will ultimately be an exercise in futility. Dr. Bawumia made these observations while delivering a lecture on the topic "Restoring the Value of the Cedi" at the Miotso Campus of the Central University College. Speaking on some of the alternative views on the causes of the cedi which were largely faulty, Dr. Bawumia stated "One of the key functions of money is to act as a store of value. Throughout history, when money ceases to perform this function, people have found refuge in other commodities as a replacement store of value. "Dollarization" is the replacement of a country's legal tender with another currency e.g. the US dollar. This happens in countries with a history of high inflation and exchange rate instability. The resort to dollars for savings is essentially a risk mitigation measure. There is a vast empirical literature that supports the view that dollarization is a reaction by rational economic players to expected depreciation of a currency. It is not the cause of depreciation. Ghanaians have over the years learnt the hard way that they cannot trust governments to keep the cedi stable. Cedi depreciation has become a fact of life and therefore Ghanaians have come up with coping strategies to deal with exchange rate depreciation, including the holding of foreign currency." rather a vote of no confidence in the local currency," he stated. How do we stop the cedi from further fall? Government's increased expenditure to blame Where is all that we borrowed? Ghana's external payments position Economy has weak and deteriorating fundamentals Don't blame economic woes on colonial structures SIngle Spine not cause of cedi depreciation. Don't blame redenomination of the cedi either What the government should do Economy is in crisis and unless ...

• published: 26 Mar 2014
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