EGP Defends Bank of Ghana’s Gold Reserve Strategy

The Coordinator of the Economic Governance Platform (EGP), Abdulkarim Mohammed, has defended the Bank of Ghana’s use of gold reserves to stabilise the cedi, describing the policy as a sound and widely accepted central banking practice.

According to him, holding gold as part of a country’s reserves is a strategic move adopted by many central banks globally, particularly in periods of economic uncertainty.

“In terms of the central bank using gold reserves to stabilise our currency and also build our reserves, that is a regular practice by central banks. Gold is a reliable store of value and also a hedge against inflation,” Mr. Mohammed said.

He noted that Ghana’s abundance of gold resources makes the strategy even more appropriate, especially at a time when global economic conditions have increased demand for the precious metal.

“In our particular case, being very rich in gold resources, it just makes economic sense that we take advantage of that. The current state of the world economy has made gold quite attractive, and prices are doing quite well,” he explained.

Mr. Mohammed also addressed concerns surrounding reports of losses incurred by the central bank in its gold purchase programme, arguing that such figures should be viewed as investment costs rather than outright losses.

“It depends on where you stand. You may call it a cost or a loss. Every investment requires that you put forward some resources before you get the benefits,” he said.

He added that if the central bank incurred a cost of about 214 million dollars but succeeded in building reserves valued at nearly 10 billion dollars, the overall economic impact justified the policy.

“It makes a lot of economic sense, given the multiplier impact of what the central bank has done,” he stated, pointing to the relative stability of the cedi as evidence of the programme’s success. “Now we have quite significant stability in our currency, and we are all reaping the benefit.”

Looking ahead, Mr. Mohammed said the focus should be on reducing future costs associated with buying gold at premium prices, a policy initially introduced to curb gold smuggling.

“Now that structures are in place and confidence has been built with local producers, we can agree on fair pricing so we don’t continue incurring high costs,” he said.

He welcomed suggestions that the central bank may step back from direct gold trading operations, allowing greater private sector participation.

“That way, the risk is shifted, private capital is attracted, and we can still maintain the stability we are currently seeing,” he added.