Economist Patrick Asuming has cautioned that Ghana’s recent gains in stabilizing the Cedi are temporary and insufficient without fundamental structural reforms to diversify the economy away from its heavy reliance on gold exports. The warning comes as the nation grapples with the ongoing volatility of its currency, highlighting a persistent vulnerability to global commodity price fluctuations.
Short-Term Measures vs. Long-Term Resilience
Professor Asuming, a lecturer at the University of Ghana, explained on Joy FM’s Super Morning Show that while Ghana has successfully implemented fiscal and monetary measures to achieve short-term currency stability, these interventions do not address the underlying economic weaknesses.
“We’ve done part of what we could do to make the currency stable. We’ve implemented the short-term measures,” he stated, acknowledging that financial flows, speculation, and policy interventions have temporarily stabilized the currency.
However, he stressed that the true determinant of the Cedi’s long-term strength lies in the nation’s balance of payments, export performance, and the breadth of its economic diversification.
“But over the long term, movements in the currency are determined by what happens on our balance of payments account,” Professor Asuming elaborated. “That is how much we are exporting, how much we are importing, and how diversified our export base and economy are.”
The Double-Edged Sword of Gold Exports
Ghana has recently experienced an upswing in its exports, largely driven by a surge in gold prices. This has provided a much-needed boost to the Cedi. However, Professor Asuming cautioned against over-reliance on this single commodity.
“Our exports have risen sharply — the highest we’ve seen in a long time,” he noted. “But what you have to understand is that it is still heavily reliant on the price of gold, which we do not control and which is extremely volatile.”
He warned that the current favorable conditions are precarious. “We are enjoying the upside of that volatility. But if conditions we do not control change and gold prices begin to fall, then the vulnerabilities will return,” he stated.
The Imperative of Diversification and Value Addition
Professor Asuming argued that Ghana has not made sufficient progress in building an economy resilient enough to withstand external shocks. The path to sustainable stability, he contends, lies in diversification and value addition.
“In terms of making the economy more resilient, sustainable and diversified so that our exports become less susceptible to global shocks, I think we have not done much yet,” he lamented.
He emphasized that processing raw materials into higher-value products is crucial. “It all comes down to value addition,” he stressed.
“Statistically and historically, the prices of higher value-added products are more stable than those of primary commodities,” Professor Asuming explained. By processing gold locally into jewelry and other finished products, Ghana could generate more foreign exchange, create more jobs, and diversify its income streams.
This strategy, he added, should extend beyond gold to other key exports like cocoa. Applying value addition across the board would not only strengthen the economy but also enhance its resilience against global economic downturns.
Building a Robust Economic Future
The economist concluded that a diversified and robust economy is the most effective safeguard against future currency instability. “I think building a more diversified and robust economy is the surest way to protect the currency against the volatility we continue to see,” he reiterated.
He further noted that value addition offers a dual benefit: it stabilizes earnings and fosters local employment, making the economy more resilient. “The person who takes raw gold and adds value earns more, and the prices of those products are less susceptible to swings in the global economy. At the same time, you create more jobs locally and make the economy more robust.”
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