The findings, if carried out should guide policymakers in deciding whether to modify, continue, or discontinue the program as part of broader economic stabilization efforts.
While the program aims to boost Ghana’s gold reserves and stabilize the cedi, economic policy think tank, the Institute for Fiscal Studies (IFS) has appealed to government to “critically examine the Gold Purchase Program (GPP) of the Bank of Ghana (BoG) to determine whether it contributed to the sharp rise in liquidity since 2022.”
The Gold Purchase Program, launched in June 2021, was designed to bolster Ghana’s foreign reserves, reduce reliance on the U.S. dollar for gold transactions, and strengthen the cedi.
Under the initiative, the Bank of Ghana began purchasing domestically mined gold in cedis instead of allowing full exportation, with the objective of improving the country’s reserve position while stabilizing the exchange rate.
While IFS commended the program for increasing Ghana’s gold reserves, it stressed the need for a thorough cost-benefit analysis to assess its broader impact on monetary stability. The Institute noted that a review of the program’s implications for liquidity growth, inflation, and exchange rate volatility is necessary to guide decisions on whether to continue or modify the initiative.
“The result of this examination, weighed against the impact of the program on the Bank’s international reserves, should inform the government’s decisions regarding whether it should continue the program or not, as part of the policy to stabilize the economy,” the IFS stated.
Former Bank of Ghana Governor, Dr. Ernest Addison, previously defended the program, stating that accumulating gold reserves would enhance Ghana’s economic resilience by reducing dependence on foreign currency holdings. He argued that the initiative, alongside other monetary policies, helped cushion the cedi against excessive depreciation in times of global economic uncertainty.
However, some analysts believe that the rapid expansion of the monetary base, potentially linked to the program, has contributed to inflationary pressures. The IFS’s call for an independent assessment suggests that while the GPP may have achieved certain objectives, its unintended macroeconomic consequences require further scrutiny.
Newly sworn in BoG Governor, Dr Johnson Asiama indicated in his address that he would reform the Bank of Ghana’s Domestic Gold Purchase Programme to improve efficiency, enhance reserve accumulation, and increase transparency in gold transactions. He also pledged to institute measures that would leverage the country’s gold reserves and strategic foreign assets more effectively to support the Ghana cedi. So, in effect, by Dr Asiama’s own words, he may have already thought of what the IFS is asking government to do, except to say that the IFS is seeking to ascertain whether or not the liquidity growth can be traced to the programme.
