Bawumia: using digital currency to enhance economic growth is the way to go

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Dr. Mahamudu Bawumia, the vice-president, believes it is past time for African countries to embrace digital currency in order to improve commerce and boost other productive sectors of their economy.

As a result, he applauded the Bank of Ghana’s intention to pilot digital money later this year in preparation for a possible statewide roll-out, noting that it would provide the currency with the requisite credibility and legal backing for use.

On Tuesday (27 July), Dr. Bawumia addressed participants at the opening ceremony of the 5th Ghana International Trade and Finance Conference (GITFiC) in Accra, saying that intra-African trade had necessitated the creation of a single central payment platform on the African continent where financial system operators could conduct all cross-border payments smoothly.

To that aim, the vice-president believes that the Pan African Payment and Settlement System (PAPSS), a central payment and collection infrastructure, will enable African businesses to clear and settle transactions in their own currencies rather than relying on third-party currencies. It would also give an alternative to the present high-cost, long-term correspondent banking agreements by facilitating trade and other economic activities throughout the continent through a single, low-cost, risk-controlled payment clearing and settlement system, he noted.

The event brought together African Central Bank Governors, CEOs of major corporations, financial institution CEOs, and members of the diplomatic community to share ideas and engage in discussions that would help to enhance economic activity and encourage growth. The conference’s theme was “Facilitating Trade and Trade-Finance in the African Continental Free Trade Area: The Role of the Financial Services Sector.”

Vice-President Bawumia stated that digitization has become one of President Akufo-most important programs and that it was critical to increase economic activity, macroeconomic stability, and growth.

“As you may recall, in a bid to improve liquidity and strengthen the banking sector, the Bank of Ghana implemented a new prudential regulatory framework. The banking sector clean-up was aimed at promoting a financially stable banking sector. Concurrently, digitization has also become one of the most consequential policies of the Nana Akufo-Addo government. When the scourge of the COVID-19 pandemic hit and forced many economies into partial and total lockdowns, it reinforced the need to pursue digitization he emphasized’’

He asserted that mobile banking was proving to be a more convenient alternative to traditional banking channels, citing the fact that several ordinary banking and money transactions were being carried out via mobile phones and electronic payment systems. “In fact, one must acknowledge that financial inclusion is required for the financial services sector to perform its role. The deployment of Mobile Money Interoperability in Ghana has demonstrated that more people can be financially engaged, and this needs to be replicated across Africa to support the AfCFTA vision’s growth,” he added.

The central bank had brought up a couple of systems through its Ghana Interbank Payment and Settlement Systems to harness digital technologies and digitized data, he said (GhIPSS). These include the e-zwich, Gh-Link, Mobile Money Interoperability, and QR Code, and ensuring that the underlying payment system functions properly is the very least we could demand from the financial system if we are to realize the ideal of continental free trade. He emphasized that because payments are at the heart of a free trade system’s day-to-day functioning, negative spillover effects might be severe if something goes wrong.

Under the supervision of the Bank of Ghana (BoG), the government passed the Payment Systems and Services Act, 2019 (Act 987) in 2019 to integrate the system intends to payment systems, payment services, and regulated organizations in the electronic payment field.” I am hopeful that the rollout of the Pan – African system will synchronize successfully with the payment systems architecture developed by central banks across Africa and bring about a reduction in cost, time variability, and decreased liquidity requirements of commercial banks and central banks settlements.

I encourage the Association of Ghana Industries (AGI), a partner entity in this conference, to help its members build a solid and resilient productive capacity to benefit from the AfCFTA implementation.” That, he said, would strengthen the government’s efforts to provide comprehensive guidance and resources for the implementation of the continental trade protocols and related action plans. He stated his hope that the conference will expand discussions about the need for Africa to develop its own models, which would enable structural change of the continent’s economy and, as a result, put Africa on a long-term growth path.