Dr Adu Owusu Sarkodie, an economist, says financial losses recorded under Ghana’s Domestic Gold Purchasing Programme (DGPP) were expected because the initiative was deliberately structured around incentives to strengthen foreign reserves and reduce gold smuggling.
He said the programme was designed to encourage artisanal and small-scale miners to sell their gold through official channels by offering attractive pricing, favourable exchange rates and tax incentives.
Dr Sarkodie made the remarks during a discussion on the cost and benefits of the programme, following concerns over losses incurred by the Bank of Ghana (BoG).
According to him, the DGPP was established primarily to increase Ghana’s reserve holdings and provide a stronger buffer to support the local currency when necessary.
He said a second major objective was to discourage gold smuggling by making official gold purchases sufficiently attractive to miners.
“You want to incentivise the miners to give their gold to you rather than selling their gold abroad,” he said.
Dr Sarkodie cited the removal of the 1.5 percent withholding tax on small-scale mining activities and exchange rate advantages as some of the incentives introduced to encourage participation.
He said those incentives inevitably imposed costs on the programme, meaning some level of financial loss was embedded in its design.
The debate over the cost of the programme intensified following the International Monetary Fund’s (IMF) assessment that the Bank of Ghana incurred losses estimated at GH¢22 billion under the DGPP.
The IMF attributed the losses to the scaling up of the programme and exchange rate differentials associated with its operations.
Dr Sarkodie said the DGPP was fundamentally a Bank of Ghana programme, and its financial implications should therefore be reflected in the central bank’s audited financial statements.
“It is a Bank of Ghana programme and so everything must sit in the books of Bank of Ghana,” he said.
He explained that figures associated with the programme were contained in the BoG’s audited accounts rather than those of the Ghana Gold Board.
While defending the rationale for the programme, Dr Sarkodie said the debate should move beyond whether losses occurred to how the costs could be reduced without undermining its objectives.
“The conversation should be how do we minimise the loss going forward while achieving the same objective,” he said.
He urged policymakers to pursue the programme’s objectives at the lowest possible cost while identifying opportunities to improve operational efficiency.
He suggested a review of service charges, exchange rate differentials and tax incentives to determine whether Ghana could accumulate reserves and curb gold smuggling more efficiently.
The economist said governments and central banks routinely faced the challenge of balancing policy objectives against their financial costs.
He therefore advocated an optimisation approach that would allow Ghana to continue building its reserves and formalising gold purchases while reducing the financial burden on the central bank.
