Extractives Industries Co-Chair defends BoG’s US$1.15bn gold-backed dollar injection

Co-Chair of the Ghana Extractive Industries Transparency Initiative (GHEITI) and policy analyst, Dr Steve Manteaw, has defended the Bank of Ghana’s (BoG) decision to inject USD1.15 billion worth of gold-backed dollars into the forex market, describing the move as a prudent use of excess reserves rather than an act of recklessness.

His comments come in response to mounting criticism following the BoG’s announcement that it will sell over a billion dollars into the market under its Domestic Gold Purchase Programme (DGPP), a policy aimed at strengthening the cedi and stabilising macroeconomic conditions.

At a recent meeting with the heads of commercial banks, BoG Governor, Dr Johnson Asiama, revealed that the injection forms part of the central bank’s broader reserve management strategy.

However, critics, including some economists and civil society groups, have warned that such large-scale interventions could deplete the nation’s reserves and signal reckless monetisation of assets.

The International Monetary Fund (IMF) and the World Bank have also previously cautioned the BoG against excessive market interventions, lending credence to the renewed public debate about the sustainability of Ghana’s reserve management policy.

But Dr Manteaw dismissed such concerns, insisting that the decision reflects strategic foresight rather than financial imprudence. He likened the move to how Saudi Arabia uses its oil revenues to back its currency, arguing that resource-rich nations often deploy excess income from natural resources to cushion their economies and stabilise domestic currencies.

“Those raising alarm about BoG’s decision to offload some ‘gold-dollars’ onto the market should note that the Saudis have not shored up their currency with chocolate but petro-dollars. It’s a balancing act. For as long as we exceed our reserve target, it makes sense to go this route,” he remarked.

According to Dr Manteaw, the funds being channelled into the forex market are drawn from above-target reserves, meaning that the core buffers remain protected.

He noted that the injection aims to improve market liquidity, smooth out erratic currency swings, and enhance interbank forex activity, all while projecting investor confidence in the central bank’s management of Ghana’s monetary system.

Critics have warned that frequent market interventions could disguise deeper structural weaknesses and make reserve replenishment difficult if global commodity prices fall. Yet, Dr Manteaw contends that as long as the BoG’s reserves remain healthy, leveraging gold-derived assets to support the cedi constitutes sound reserve management, not recklessness.

He stressed that the strategy sends a strong signal that Ghana is utilising its natural resources strategically to defend its currency rather than relying solely on borrowing or external bailouts. This is not about recklessness. It’s about using what we have, our gold, to strengthen what we need, which is our currency and macroeconomic stability,” Dr Manteaw added.