Ghana’s newly appointed central bank governor, Johnson Asiama, has suspended the nation’s gold-for-oil program and expressed confidence in the stabilization of the cedi, following significant volatility in the previous year. This strategic shift signals a renewed focus on traditional monetary policy and fiscal discipline to address economic challenges.
Asiama, in a recent interview, emphasized the central bank’s commitment to maintaining an “appropriate monetary policy stance.” He believes that this approach, coupled with the current administration’s dedication to fiscal responsibility, will contribute to stability in foreign exchange markets. With interest rates currently at 27% and inflation easing to 23.5% in January, Asiama highlighted the importance of improved coordination between monetary and fiscal policies to further mitigate inflationary pressures. This comes as Ghana strives to recover from the economic fallout of its 2022 debt default and subsequent $3 billion bailout from the International Monetary Fund.
The cedi depreciated by 19% against the dollar last year, experiencing significant fluctuations. The gold-for-oil program, implemented by the previous government, aimed to counter these currency swings by using locally purchased gold to barter for oil, thereby reducing reliance on foreign currency reserves. However, Asiama revealed that the program resulted in “some losses,” leading to its suspension. He did not disclose specific details regarding the extent of these losses.
Ghana’s oil import bill reached $4.5 billion in 2024. By September of the preceding year, the Bank of Ghana had acquired 65.4 tons of gold, both for its foreign reserves and the gold-for-oil initiative. Of this amount, 30.5 tons were allocated to foreign reserves by the end of last year. Asiama indicated that the central bank might relinquish its role in gold purchasing, potentially transferring this responsibility to a forthcoming Gold Board. This move suggests a potential restructuring of the country’s gold management strategy.
Experts offer insights into the complexities of Ghana’s economic situation. Godfred Bokpin, a finance lecturer at the University of Ghana Business School, argues that the gold-for-oil program was not a comprehensive solution to exchange rate volatility or inflation. He suggests that a more effective approach would involve substantial and efficient investment in the agricultural sector, potentially reducing inflation to 13% by year-end. Bokpin emphasizes the significant role of food inflation in Ghana’s current economic challenges. This perspective highlights the need for a multifaceted strategy that addresses underlying structural issues within the economy.
In conclusion, the suspension of the gold-for-oil program marks a pivotal moment in Ghana’s economic policy. The new administration’s focus on monetary policy, fiscal discipline, and potential agricultural sector reforms signals a departure from previous strategies. The success of these measures will be crucial in stabilizing the cedi, curbing inflation, and fostering sustainable economic growth in the long term. The international community will be closely observing Ghana’s progress as it navigates these complex economic challenges.
