Global Dollar Shortfall: An Avenue of Opportunity for Future Markets Such as Ghana
The global economy is currently facing a growing shortage of dollars—a deep shortage of U.S. dollars in global markets. The shortage, which has been caused by a tighter U.S. monetary policy, higher interest rates, and reduced foreign investment, poses significant challenges to most nations that use the dollar for trade, debt servicing, and reserves. But for emerging economies like Ghana, this crisis can ironically provide new opportunities.
The dollar domination in the previous era has guided global trade and finance, leaving most developing countries vulnerable to the external shocks. Ghana, as in most other African nations, faced balance of payment pressures as well as inflation due to being exposed to the dollar for importation, service of debt, and foreign reserve. The current dollar squeeze compels countries, however, to re-engineer their economic paradigm, diversify trading blocs, and create local financial infrastructure.
One of the most important avenues for Ghana is regional integration. With the African Continental Free Trade Area (AfCFTA) up and running, Ghana can leverage intra-African trade to diversify out of dollar-denominated transactions. Facilitating local currency or regional currency trade can shield economies from external monetary shocks while boosting African financial sovereignty.
Another option is in expanding the use of other reserve currencies and payment systems. With China, Russia, and Gulf states diversifying away from the dollar, Ghana can also diversify and make alliances that use the yuan, euro, or other currencies in its trade agreements. Blockchain technology and digital currencies also have tremendous potential to avoid dollar-based transactions, reducing cross-border payments as cheaper and faster.
Furthermore, the dollar squeeze may force Ghana to bet heavily on local manufacturing and value addition. Investment in agro-processing, manufacturing, and renewable energy can reduce the import bill while generating export value, improve the cedi, and improve the external position of the economy. Increased productivity locally, apart from improving self-sufficiency, also attracts diversified foreign direct investment.
Even if a worldwide dollar shortage would seemingly be a menace first, it can become the beginning of a more powerful economic strategy for a country like Ghana. By making the crisis the stage for reform, innovation, and cooperation across regions, Ghana can make itself a new center in an emergent multipolar world economy.
blogpay
Total Comments: 0