Dr. Mahamudu Bawumia, Ghana's former Vice President, has defended the Gold-for-Reserves programme, calling it a necessary response to the nation's foreign exchange crisis. The initiative allowed Ghana to purchase approximately $5 billion worth of gold within two years. This significantly strengthened the country's reserve position.
This programme was developed when Ghana lost access to international capital markets following the Russia-Ukraine war. Ghana traditionally relied on these markets to raise about $3 billion annually. The inability to access these funds worsened the country's balance of payments difficulties. This placed significant pressure on the Ghana cedi, which was depreciating almost daily.
The Gold-for-Reserves programme fits into Ghana's broader economic strategy to find alternative funding sources during global market disruptions. Ghana, a leading gold producer, held only 8.7 tonnes of gold in reserves in 2021. This programme leveraged Ghana's unique advantage: it could buy locally produced gold with cedis. This avoided the need to first acquire foreign exchange to purchase gold on international markets. This innovative approach helped address the severe foreign exchange shortages and cedi depreciation.
Dr. Bawumia described the initiative as an example of “out-of-the-box thinking” because no conventional economic model offered a ready solution. He stated the Bank of Ghana spent nearly a year studying the proposal before implementation. This careful consideration underscores the programme's strategic importance. The programme's success is evident in the increased reserve position.
The strengthened reserves have improved Ghana's ability to intervene in the foreign exchange market. Dr. Bawumia noted that by the end of 2024, the International Monetary Fund removed a restriction. This restriction had limited the Bank of Ghana to a maximum of $80 million in monthly forex intervention. Since then, the Bank of Ghana has been able to inject at least $1 billion into the market each month. This substantial increase in foreign exchange supply is expected to reduce pressure on the cedi, based on fundamental demand-and-supply principles. The Gold-for-Reserves and Gold-for-Oil initiatives were crucial in a period when traditional foreign exchange sources had dried up. These programmes represent a strategic pivot in Ghana's economic management.