One heated debate currently ongoing in the country is the International Monetary Fund’s (IMF) assessment of Ghana’s Domestic Gold Purchasing Programme (DGPP). While a section believes the IMF is attempting to downplay a programme that is yielding results for the country, others believe otherwise.
Contributing to this debate is CDD Ghana’s Fellow and board member of Ecobank, Dr. Hene Aku Kwapong.
For Dr. Kwapong, the public must properly understand why the IMF has raised concerns, arguing that the Fund’s assessment is neither political nor ideological, but grounded in basic central banking principles.
According to him, the IMF’s position flows directly from its core mandate of safeguarding global monetary stability. As every central bank is part of that system, any policy that could weaken a central bank’s balance sheet naturally attracts scrutiny.
He therefore goes ahead to offer a number of reasons why the IMF took the stance it took on the DGPP.
“The IMF is not a bank. It is primarily responsible for the overall stability of the world monetary system that every Central Bank is a member of. So, any risk to that system is part of their mandate. What the IMF is doing here is not ideological nitpicking or technocratic box ticking. It is a fairly orthodox, and frankly predictable, exercise in central banking arithmetic,” he noted.
It Starts With the Central Bank’s Balance Sheet
Dr. Kwapong explains that at the heart of the IMF’s assessment is a simple question: Does the DGPP strengthen or weaken the Bank of Ghana’s financial position?
While gold is a legitimate reserve asset, it comes with risks. Its price can swing sharply on global markets, and it may not always be easy to convert into cash during times of stress, posing the challenge of liquidity strain.
When too much of a central bank’s reserves are tied to a single commodity, flexibility reduces and valuation risks rise. This, he stresses, is not a judgment against gold itself. It is a portfolio risk issue that any prudent financial manager would recognise.
“When a growing share of reserves is tied up in a single commodity, valuation risks rise, and flexibility falls. This is not a moral judgment about gold. It is a portfolio argument that any risk manager would recognize,” Dr. Kwapong explained.
Losses and the Problem of Hidden Fiscal Costs
Another key concern raised by the IMF relates to profitability and losses arising from quasi-fiscal activities such as the DGPP.
Central banks, Dr. Kwapong notes, are not commercial traders or hedge funds. When they incur losses while pursuing government objectives, those losses do not disappear. They weaken the institution’s capital and, over time, undermine credibility.
For him, the IMF’s view is straightforward. If the government wants to run a commodity purchasing scheme, the fiscal costs should be clearly reflected in the national budget.
Allowing such costs to sit quietly on the central bank’s books blurs accountability and risks eroding the Bank of Ghana’s independence.
He stressed that, “If the state wants to run a commodity purchasing scheme, the fiscal costs should sit transparently in the budget. Allowing them to be quietly absorbed by the central bank erodes capital, weakens credibility, and ultimately compromises monetary policy independence.”
Risk Management Matters More Than Good Intentions
The IMF also examines whether strong systems exist to manage price volatility, liquidity pressures, and operational risks linked to large-scale gold transactions.
Dr. Kwapong, therefore, warns that many well-intended policies fail at this stage. Without proper hedging strategies, transparent accounting, and strong internal controls, shocks from volatile global markets can quickly spill into a central bank’s finances.
In such cases, the problem is not policy ambition, but weak safeguards.
Implications for Monetary Policy and FX Markets
Perhaps the IMF’s biggest concern, according to Dr. Kwapong, is how the DGPP affects monetary policy and the foreign exchange market.
He maintains that when a central bank is simultaneously setting interest rates, managing liquidity, buying gold, and influencing FX flows, conflicts can arise. Market signals become distorted, private actors may be crowded out, and price discovery weakens.
Over time, this can make monetary policy less effective and harder to transmit through the economy.
“When the same institution is setting policy rates, managing liquidity, buying gold, and influencing FX flows, conflicts are no longer theoretical. Price discovery weakens, market depth suffers, and policy transmission becomes noisy,” he argued.
A Warning, Not a Rejection
Dr. Kwapong emphasizes that the IMF is not saying the DGPP is fundamentally wrong. Rather, it is a caution. For agrees that without clear fiscal backing, strong risk management, and firm institutional boundaries, the programme risks turning the Bank of Ghana into something it should not be.
“The underlying message is not that the DGPP is inherently misguided, but that without proper fiscal backing, risk management, and institutional boundaries, it risks turning the Bank of Ghana into something it should never be. A development agency with a printing press,” he added.
The Board Member of Ecobank says the IMF’s assessment reflects what it expects of any financially sound central bank. Not ideology. Not hostility. Just orthodox, predictable, and globally accepted central banking arithmetic.
