In a discussion regarding the Bank of Ghana’s recent launch of the Ghana Gold Coin as an investment vehicle, financial analyst Dr. Wisdom Kofi Dogbey shared his perspective, commending the initiative but cautioning that it is not a comprehensive solution to the country’s inflationary challenges.
The initiative aims to ease pressure on the cedi by encouraging investors to buy and hold the gold coin instead of the U.S. dollar. Dr. Dogbey’s insights highlighted both the potential benefits and the limitations of the policy. Dr. Dogbey began by praising the Bank of Ghana for launching the gold coin initiative.
“I think it’s a good move by the Bank of Ghana. For some time now, it looked like the Bank of Ghana was struggling a bit with policy when it comes to coming up with sound economic polices to address inflation and the depreciation of the cedi. But this one, I think they might have gotten it right, and we must commend them for that.”
Dr. Wisdom Kofi Dogbey Financial Analyst
Dr. Dogbey explained that the introduction of a gold coin as an investment vehicle could offer stability due to the long-standing role of gold in financial systems.
Gold, as a globally recognized store of value, could potentially act as a force against the depreciation of the local currency and the volatility in financial markets.
“Gold coins are known to stabilize the local currency, providing a stable value benchmark which could potentially restore confidence in the cedi and also reduce volatility.”
Dr. Wisdom Kofi Dogbey Financial Analyst
A Hedge Against Inflation and Boost to the Gold Market
In his analysis, Dr. Dogbey emphasized the importance of the gold coin in diversifying monetary tools, which would allow the Bank of Ghana to manage money supply more flexibly.
“It is a good hedge against inflation, and it diversifies monetary tools, allowing flexibility in managing money supply and also ensuring economic stability, and of course, it is a boost to the local gold market.”
Dr. Wisdom Kofi Dogbey Financial Analyst
However, Dr. Dogbey did not overlook the potential risks associated with the introduction of the gold coin.
One key issue he raised is the perception that such initiatives could signal a loss of control over the local currency.
“Investors need to know that the perception sometimes is that when a central bank pushes gold coins as an investment option, there is that perception of a loss of control, and It may be perceived as a lack of confidence in the local currency, which it is.”
Dr. Wisdom Kofi Dogbey Financial Analyst
The demand for foreign currencies is expected to increase further as the country enters the final quarter of the year, marked by heightened import activity due to the holiday season.
However, others perceived that It is not a cure to our inflationary situation. The inflationary pressures that the cedi keeps feeling, and of course, we know that there’s still an uptick. If you look at the Swiss franc, euro, pound, and dollar, the movements are still problematic, especially getting into the last quarter of the year.
A Perspective from Academia
Meanwhile, a respected economist Godfred Alufar Bokpin of the University of Ghana Business School, outlined that the gold coin is not a comprehensive solution. However, his weighed in on the issue, emphasized that while the initiative is innovative, it alone cannot resolve the structural economic challenges Ghana faces.
In his detailed analysis of the gold coin, Dr. Dogbey also discussed the specifics of the coin, including its various denominations.
Challenges Ahead: The Need for Dollars, Not Gold
Dr. Dogbey concluded by reiterating that while the gold coin is a step in the right direction, it does not address the immediate need for foreign currency, particularly the U.S. dollar, which is critical for imports. He asserted; “We’re going into the Christmas season, and people will need dollars, not gold, to be able to import and all of that stuff.
Dr. Wisdom Kofi Dogbey’s analysis of the Bank of Ghana’s gold coin initiative is a balanced assessment that acknowledges the positive aspects of the policy while also recognizing its limitations.
While the gold coin may help stabilize the cedi and boost the local gold market, it is not a comprehensive solution to the country’s inflationary pressures. Investors and policymakers alike must temper their expectations and remain vigilant as the last quarter of the year unfolds.
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