By: Prof Dennis Nsafoah
Ghana’s 2026 Mid-Year Fiscal Policy Review contains a policy choice that deserves much more scrutiny than it has received. While keeping the overall expenditure envelope broadly unchanged, the government has reallocated GH¢5 billion away from capital expenditure to GoldBod to fund the Ghana Accelerated National Reserve Accumulation Policy (GANRAP), whose objective is to raise international reserves to 15 months of import cover by 2028. In effect, the Mid-Year Review preserves total spending while shifting its composition from productive capital investment toward reserve accumulation.
That choice would already warrant debate on its own. But the recently released IMF staff reports make it considerably harder to defend.
The IMF’s assessment is unusually clear: Ghana’s reserve adequacy is estimated at about six months of prospective imports, not fifteen. More importantly, the Fund explicitly states that reserves as high as the 15 months envisaged under GANRAP “would not be advisable on precautionary grounds alone” because of their non-negligible economic costs.
This begs the question: why is government pursuing a reserve target that significantly exceeds what its principal multilateral adviser considers adequate—while simultaneously reducing capital expenditure?
The IMF is not arguing against reserve accumulation. This distinction is important. The IMF is not recommending that Ghana stop building reserves. Its assessment is that Ghana, as a commodity exporter exposed to terms-of-trade shocks, capital-flow volatility and other external vulnerabilities, should maintain a healthy reserve buffer. Its estimate of adequate reserves is approximately six months of imports.
Indeed, the authorities themselves commit in the IMF programme documents to reaching at least six months of prospective imports by end-2029, describing that level as adequate insurance against commodity-price shocks, capital-flow reversals, climate risks and regional insecurity. This makes the contrast with GANRAP striking. The government has simultaneously committed to a six-month reserve objective in its programme with the IMF while pursuing a domestic policy designed to reach 15 months by 2028.
The issue is therefore not reserves versus no reserves. It is adequate reserves versus excessive reserves.
Fifteen months has a very large opportunity cost
The economics of reserve accumulation becomes less favourable as reserves rise. At low levels, the benefits are substantial. Reserves protect a country from sudden stops in capital flows, commodity-price shocks, temporary export disruptions and disorderly exchange-rate movements. But those benefits diminish as the reserve stock becomes larger. However, the costs do not. The IMF makes precisely this point. Resources used to acquire low-yielding safe foreign assets could instead be deployed toward higher-return domestic investment.
This is no longer an abstract theoretical trade-off. The Mid-Year Budget has made it concrete. Government has directed GH¢5 billion to GoldBod for GANRAP while reducing capital expenditure by GH¢5 billion. In effect, Ghana is exchanging one form of national asset for another: fewer resources for productive capital formation today in order to accumulate a larger stock of foreign reserves.
The relevant economic question is whether the return from moving Ghana’s reserves from an adequate level of around six months toward fifteen months exceeds the return from roads, irrigation, energy infrastructure, hospitals, schools and other productivity-enhancing public investments.
It is difficult to see the economic case.
The sterilisation cost may be even more important
There is another cost that receives far less public attention. Gold purchases are ultimately made with cedis. When domestic currency is injected into the economy to purchase gold and the corresponding foreign exchange is accumulated as reserves, the Bank of Ghana must sterilise the additional liquidity if it wants to prevent the reserve-accumulation programme from becoming expansionary. Sterilisation is expensive. The IMF estimates that the cost of sterilising reserve accumulation was already about 1 percent of GDP in 2025. Under a scenario in which Ghana actually reaches 15 months of import cover, the IMF estimates that the cost of open-market operations alone could rise to around 3 percent of GDP.
That is an extraordinary cost for a country with enormous infrastructure and social-development needs. But the alternative is equally problematic. If the Bank of Ghana does not fully sterilise the liquidity created by large-scale gold purchases, the increase in base money can translate into faster growth in broader money and credit. Over time, that excess liquidity can put upward pressure on domestic demand, inflation and the exchange rate. This creates a fundamental tension within GANRAP. The policy is intended to strengthen macroeconomic stability by building external buffers, yet if the associated liquidity is not sterilised, it can generate the very inflationary and exchange-rate pressures the policy is meant to guard against. Ghana would then face an uncomfortable choice: either incur increasingly large sterilisation costs to sustain the reserve build-up or tolerate monetary expansion that could undermine the stability GANRAP is designed to protect.
That is why the size of the reserve target matters. The issue is not simply whether Ghana can accumulate 15 months of import cover, but whether doing so can be achieved without imposing substantial fiscal and monetary costs on the rest of the economy.
The importance of gold exports
There is another reason why fifteen months of import cover is difficult to justify. Ghana is not merely accumulating a stock of reserves. It also has a very large and continuing flow of foreign exchange from gold exports. Gold now accounts for more than half of Ghana’s exports, and the IMF estimates that artisanal and small-scale gold exports alone reached US$10.9 billion in 2025.
That matters for reserve adequacy. A country with weak and uncertain foreign-exchange inflows needs a larger precautionary stock than a country with strong, recurring export receipts. Ghana certainly remains exposed to gold-price volatility, which is precisely why some reserve accumulation is warranted. But the existence of a strong continuing gold-export flow weakens rather than strengthens the case for holding fifteen months of imports permanently in reserves. The IMF’s own reserve-adequacy calculation already incorporates Ghana’s commodity-export dependence and exposure to terms-of-trade volatility. It still arrives at approximately six months.
Fifteen months therefore requires a separate economic justification. The Mid-Year Review or GANRAP policy document does not provide one.
There is also a question of priorities
This issue becomes more consequential when placed within Ghana’s broader fiscal context. The IMF itself acknowledges that Ghana’s recent fiscal adjustment has relied heavily on spending compression despite large development and security needs. The Mid-Year Review confirms that expenditure execution remains below programme. By June, total expenditure on a commitment basis stood at 8 percent of GDP compared with a target of 9.9 percent, while primary expenditure was 6.6 percent of GDP against a target of 8.1 percent. Capital expenditure itself was only GH¢22.2 billion in the first half, including just GH¢2.4 billion in foreign-financed capital spending. Against that background, reallocating GH¢5 billion toward a reserve target far above the IMF’s adequacy benchmark is not a trivial decision.
It represents a choice about what Ghana should do with scarce fiscal space. And the IMF’s broader advice points in the opposite direction. Its latest programme assessment says the improvement in Ghana’s debt trajectory has created carefully calibrated fiscal space that can help the country address pressing development needs and strengthen social spending, while maintaining debt sustainability. That is exactly the opportunity Ghana now faces.
Why, then, is government still pursuing fifteen months?
There may be a political economy explanation.
Ghana’s recent crisis created a deep institutional fear of reserve depletion. The collapse of the cedi, loss of international market access and decline in usable reserves understandably produced a desire to ensure that the country never again approaches such vulnerability.
But policymaking after a crisis can overcorrect.
The lesson from having too few reserves should not be that Ghana must accumulate the largest reserve stock possible. The correct lesson is that Ghana should maintain an adequate buffer while pursuing credible fiscal policy, exchange-rate flexibility and a productive economy capable of continuously generating foreign exchange.
There may also be a political attraction to reserves because they provide a highly visible indicator of economic strength. A government can announce that reserves have reached US$20 billion or ten months of imports much more easily than it can quantify the long-run productivity gains from irrigation, electricity infrastructure or agricultural roads. But what is easily measured is not necessarily what produces the highest economic return.
Ghana does not need to choose between stability and development
GANRAP should not be abandoned. Its underlying model—building reserves from domestically generated gold rather than borrowed foreign currency—is preferable to the Eurobond-funded reserve accumulation of the past.
However, the 15-month target should be reconsidered. A reserve objective closer to the IMF’s estimated adequacy level of six months, perhaps with an additional prudential margin, would still provide Ghana with substantial protection against external shocks while freeing significant resources for productive domestic investment.
The issue is ultimately one of diminishing returns. The first few months of reserve cover are extremely valuable because they provide insurance against external shocks and disorderly market conditions. The fifteenth month provides far less additional protection, while its fiscal and monetary costs continue to rise.
Ghana has spent the past several years restoring macroeconomic stability. That achievement should now create space for investment in productive capacity. Reducing capital expenditure in order to finance an exceptionally ambitious reserve target risks moving policy in the opposite direction.
My biggest concern is that the government’s posture, both in the Mid-Year Review and in its discussions with the IMF, suggests that it remains firmly committed to the 15-month target despite the Fund’s assessment that a much lower reserve buffer would be adequate. My hope is that the 2027 Budget will mark a change in that posture and place greater emphasis on balancing reserve accumulation with the equally urgent need for productive public investment.
The writer is Assistant Professor of Economics, Niagara University, NY and Member of Research Committee, Tesah Capital
