Former Vice President Dr Mahamudu Bawumia has attributed the Bank of Ghana’s increased foreign exchange intervention to the success of the Gold-for-Reserves programme, saying the initiative helped remove previous restrictions imposed under Ghana’s International Monetary Fund (IMF)-supported programme.
Dr Bawumia made the remarks on Thursday during a meeting with members of the Ghana Small-Scale Miners Association in Accra, where discussions focused on reforms and challenges within the mining sector.
Bawumia Explains IMF Forex Restrictions
According to Dr Bawumia, the Bank of Ghana previously faced strict limits on the amount of foreign currency it could use to intervene in the foreign exchange market and support the Ghanaian cedi.
He said the restriction was part of the conditions associated with the IMF-supported programme.
“One of the restrictions for the IMF programme that we engaged in was the amount of foreign exchange that the central bank could use to intervene to support the cedi. We were given a maximum of $80 million a month,” he said.
Dr Bawumia explained that the restriction created significant challenges for Ghana’s economy at a time when the cedi was depreciating rapidly.
“So, we were really constricted in terms of availability of foreign exchange. And at the same time, the cedi was depreciating almost on a daily basis,” he said.
Gold-for-Reserves Boosts Ghana’s Foreign Exchange Reserves
Dr Bawumia said the situation changed after Ghana began building up its foreign exchange reserves through the Gold-for-Reserves initiative.
According to him, increased reserve accumulation helped create room for the central bank to undertake larger interventions in the foreign exchange market.
“Because we had built up the foreign exchange reserves through Gold-for-Reserves, that restriction was removed. And since then, the Bank of Ghana has been able to put in at least $1 billion a month in the market.”
He highlighted the significant difference between the previous limit and the reported level of intervention.
“From $80 million maximum per month ($960 million per year) to $1 billion a month! We couldn’t even do $1 billion a year before.”
Gold Policy and the Ghana Cedi
The comments have renewed attention on the relationship between Ghana’s gold production, foreign exchange reserves and cedi stability.
The Gold-for-Reserves programme is part of the broader Domestic Gold Purchase Programme, which seeks to increase the use of locally produced gold in strengthening Ghana’s official reserves and improving foreign exchange inflows.
The initiative has been associated with efforts to increase gold-related foreign exchange inflows and reserve accumulation, providing the country with additional resources to manage external economic pressures.
Bawumia Engages Small-Scale Miners
Dr Bawumia made the comments while engaging members of the Ghana Small-Scale Miners Association on challenges facing the mining industry.
The discussions also covered proposed reforms aimed at promoting responsible mining, environmental protection, job creation and local value addition.
The meeting formed part of consultations being conducted by the New Patriotic Party’s Identifiable Groups Committee on the Extractive Sector.
The consultations are expected to contribute to discussions on policies that could strengthen Ghana’s mining industry while increasing the economic benefits of the country’s natural resources.
Gold-for-Reserves and Ghana’s Economic Recovery
The Gold-for-Reserves initiative remains an important part of discussions surrounding Ghana’s economic recovery, foreign exchange reserves and monetary policy.
By increasing official gold holdings and foreign exchange inflows, the programme is intended to strengthen Ghana’s external position and provide greater flexibility in managing currency pressures.
The debate over the programme also highlights the broader importance of gold production, small-scale mining, foreign exchange management and cedi stability to Ghana’s economy.
As policymakers continue to pursue economic reforms, the effectiveness of gold-backed reserve accumulation and foreign exchange market interventions is likely to remain a major issue in discussions about Ghana’s economic stability.
Source: newsthemegh.com