The Institute of Economic Affairs (IEA) has proposed that the Bank of Ghana (BoG) consider replacing the existing central bank system with a currency board.

According to the Institute, this change would help maintain the Cedi as a legal tender, ensuring that all Cedis in circulation are fully backed by foreign exchange.

In a statement released on Monday, May 20, the IEA proposed several measures to stabilise the depreciating cedi.

One of the key recommendations was that the currency board should not lend to the government or banks.

The IEA expressed optimism that with these conditions in place, the depreciation of the Cedi and inflation could be minimized.

"An alternative to full dollarisation is to adopt a currency board system in place of the central bank system. In that case, the cedi would be maintained as legal tender.

However, the currency board would ensure that Cedis in circulation are fully backed by FX. The Cedi would also be pegged to the dollar at a fixed rate.

Further, the currency board would not lend to government or banks," the statement said.

"With these conditions in place, cedi depreciation and inflation would be minimised.

However, the currency board has limitations, including the potential loss of independent monetary policy and loss of lender-of-last-resort function."

The IEA emphasised that stabilising the cedi is a complex task that requires concerted efforts. They proposed various measures for consideration by economic managers and to stimulate debate on this crucial national issue.

"Some of the measures may reinforce others while some may preclude others. We are proposing them for consideration by our economic managers and to prompt debate on what is obviously one of the most important national challenges," the IEA stated.

"We do not believe that stabilizing the cedi is rocket science. We only need to take concerted actions to achieve that ever-elusive goal. Not acting while the Cedi continues to bleed is not an option!"