The recent appreciation of the Cedi against the US dollar and other trading currencies has led to many arguments and credit-taking competitions.
For political expediency and partisan
interest, some have credited the Cedi recovery to:
1. Gold for Oil Policy spearheaded by Dr.
Mahamudu Bawumia.
2. GoldBod Initiative spearheaded by Mahama's
government.
3. External Influences such as US-China
Tariffs war and trade tensions.
However, it is important to state certain
facts without any form of political interest as follows:
1. The "Gold for Oil" is not the
same as "Gold for Reserves".
"Gold for Oil" was implemented by
Akufo-Addo's government as a specific programme where gold was used to pay for
oil imports with the sole objective of reducing foreign exchange dependency as
well as ensure the stabilization of fuel prices on the Ghanaian market. That
is, domestically produced gold in Ghana was used to pay for oil imports instead
of using foreign currency especially US Dollars.
The net effect of "Gold for Oil"
policy reduce dependence on foreign trading currencies for oil imports, reduce
the impact of exchange rate fluctuations on fuel costs, and potentially ensure
the stability of fuel prices on the domestic market.
In nutshell, Bawumia's "Gold for
Oil" was a specific policy aimed at providing solution to a specific
economic challenge of Fuel Pricing Stability. That is, the policy was an
innovative barter arrangement aimed at exchanging domestically procured gold
for imported petroleum products thereby reducing the need for US Dollars to buy
fuel from the world market. The Gold for Oil was a specific need for the Bulk
Distribution Companies(BDCs), and the deal involved the Bank of Ghana
purchasing gold from small-scale gold operators in Cedis, which the Central
Bank then sells on the world market for US Dollars. The dollars realised from
the sales was used by Bank of Ghana to purchase the oil or in some
instances, swapped the gold for the oil.
On the other hand, "Gold for
Reserves" is a continuous policy and comprehensive financial strategy
implemented by Bank of Ghana and other Central Banks, aims at managing a
country's overall foreign exchange portfolio.
The rationale behind "Gold for
Reserves" Policy is to provide a stable exchange rate regime (that is
building foreign exchange reserves), stable store of value, buffer against
inflation, investments-diversification, and act as a hedge against financial
instability.
The "Gold for Reserves" policy has
been in existence long before the introduction of "Gold for Oil
Policy", and both were running concurrently until the current Bank of
Ghana Governor, Dr. Johnson Asiama announced the outright suspension of the
"Gold for Oil" policy, citing:
(a). Policy implementation challenges
(c). Operational challenges
(d). Financial losses to the State.
It is important to state that, the "Gold
for Reserves" Policy is still in place and has always been in operations,
and that, the recent GoldBod initiatives seems to only enhance the
effectiveness and efficiency of the operationalization of "Gold for
Reserves" Policy of Bank of Ghana. With or without the GoldBod, the Bank
of Ghana would still continue to operate its traditional "Gold for
Reserves" Policy.
Was "Gold for Oil" Policy able to
addressed the depreciation of the Cedi against the US Dollar and other trading
currencies since its implementation from 2022 to March 2025? The answer to this
question is BIG NO.
Was the "Gold for Oil" Policy able
to ensures the stability of domestic fuel prices in Ghana between 2022-March
2025? The answer to this question is Partially Yes.
*Unbiased Verdict*
The recent appreciation of the Cedi against
the US Dollar and other trading currencies are largely due to the following
reasons:
1. Policy Reforms, Fiscal Policy Objectives, and
Monetary Policy objectives of Mahama's government.
2. Favorable global economic conditions
especially the recent US-China trade tensions(Tariffs War between US and other
countries especially in relation to China).
Both US and China are significant trading
partners of Ghana.
3. Ongoing Fiscal Reforms(Fiscal discipline
programme) under Ghana-IMF programme, and the credit has to be given to former
President Akufo-Addo, Ken Ofori-Atta, former Minister of Finance, and Hon. Dr.
Mohammed Amin Adam, former Minister of Finance.
It is without doubt that, the $ 3 billion IMF
Extended Credit Facility has restored some considerable level of economic
confidence, with an anticipated $370 million tranche hitting the account of
Bank of Ghana soon.
For the records, Mahama ended his first term
with IMF cushion from 2015-2016, and his second term too is being cushioned
with IMF from 2025-2026.
4. Ongoing Ghana's Debt Restructuring
Programme, and the credit has to be given to former President Akufo-Addo, Ken
Ofori-Atta, former Minister of Finance, and Hon. Dr. Mohammed Amin Adam, former
Minister of Finance.
During the 2025 Budget Speech delivered on
11th March 2025, Hon. Dr. Ato Forson stated that, "Mr. Speaker, you may
recall that the government(Akufo-Addo's government) commenced the debt
restructuring programme in 2022 to restore debt sustainability and economic
stability. Mr. Speaker, as of now, the restructuring process is approximately
93 percent completed completed. The remaining 7 percent relates to debt of
US$2.7 billion owed to commercial creditors. We(Mahama's government) are
committed to completing the remaining debt restructuring as soon as
possible"(Sections 101, 102 & 103 and Pages 23-24 of the 2025 Budget
Speech).
It is very worthy to state that, the Ghana's
debt restructuring has provided a necessary vital breathing room for Mahama's
government, with the next major payment due in July 2025.
5. The recent S&P Global Ratings Upgrade
of Ghana's credit status from selective default to CCC+, and the credit has to
be given to President John Mahama, and Hon. Dr. Ato Forson, Minister of
Finance.
6. The recent direct market interventions by
the Bank of Ghana, in the forex injection of $490 million in April 2025, and
the credit has to be given to Dr. Johnson Asiama, Governor of Bank of Ghana.
7. World market pricing of Ghana's gold at $
3, 400 per ounce, and cocoa at $ 10, 000 per ton.
8. Establishment and operationalization of the
Ghana Gold Board(GoldBod) even though UP Tradition Institute still has some
strong reservations about the monopolistic creation of the GoldBod.
9. The decline of the US Dollar Index(DXY)
leading to the weakening of the dollar against other trading currencies.
10. The increased gold reserves of Bank of
Ghana, valuing at approximately $3.6 billion by 30th April 2025 kind courtesy
the combined positive effects of "Gold for Reserves" Policy(with
credit to Bank of Ghana), suspended "Gold for Oil" Policy(with credit
to Dr. Mahamudu Bawumia), and the operations of the GoldBod(with credit to
President John Mahama, especially the requirements that, 20% of gold export
proceeds should be converted to Ghana Cedis before dollar exchange as well as
the decision of Mahama's government through GoldBod to purchase 20% of gold
from large-scale mining companies).
The recent recovery of the Cedi is a
combination of several factors, and therefore, it is very pedestrian for anyone
to single out one initiative as the causality of the Cedi appreciation.
Based on the available facts and data, it fair
to state that:
1. Mahama's government(President John Mahama,
Hon. Ato Forson, Minister of Finance, and Dr. Johnson Asiama, Governor of
Bank of Ghana) contributed 50% to the recent appreciation of the Cedi.
2. Akufo-Addo's government(President
Akufo-Addo, Hon. Ken Ofori-Atta, Hon. Mohammed Amin Adam, and Governor Ernest
Addison) contributed 25% to the recent appreciation of the Cedi.
3. IMF-Ghana Programme, and CCC+ credit status
of Ghana by S&P Global Ratings contributed 15% to the recent appreciation
of the Cedi.
4. Favorable Global Economic conditions such
as US-China Tariffs war contributed about 9% to the recent appreciation of the
Cedi.
5. "Gold for Oil" Policy and other
domestic factors contributed about 0.5-1% to the recent appreciation of
the Cedi.
Therefore, the role of the suspended
"Gold for Oil" Policy to the recent Cedi appreciation is highly
insignificant on a scale of 100%.
In conclusion, to safeguard the sustainable
appreciation of the Cedi against the US Dollar and other trading currencies,
the UP Tradition Institute would like to respectfully recommend to the Mahama's
government or future government of the New Patriotic Party(NPP) to consider
the:
1. Enactment of "Ghana Gold Reserve
Act" under the direct control and supervision of the Bank of Ghana.
The "Ghana Gold Reserve Act" would
protect the currency system of Ghana, provides guidelines/regulations for the
better use of the monetary gold stock at the Bank of Ghana.
The operations/functionality of the
"Ghana Gold Reserve Act" would NOT be the same as the Ghana Gold
Board(GoldBod). The GoldBod would contribute to the "Gold for
Reserves" Policy whereas the "Ghana Gold Reserve Act" would
ensure the proper international best practices as far as the monetary use
of gold stock at Bank of Ghana is concerned.
2. Establish the "Exchange Stabilization
Fund(ESF)" under the "Ghana Gold Reserve Act", to control the
value of foreign currencies in relation to the performance of the Cedi.
3. Amend the Foreign Exchange Act, 2006(Act
723) to include the authority of the President of the Republic of Ghana to
establish the gold value of the dollar or any foreign currency by proclamation
through the Ministry of Finance without unnecessary approval from the Bank of
Ghana.
......Signed....
Razak Kojo Opoku(PhD)
Founding President, UP Tradition Institute.