The Bank of Ghana (BOG) has launched a momentous gold acquisition program as an efficient way of growing the foreign exchange reserves of the country to supplement the traditional ways that Ghana has been using over the years.
The program will enable Ghana to purchase gold as part of efforts to build its reserves. According to Dr. Addison, this initial step will enable BOG buy domestically produced gold from selected gold aggregators and mining firms. The BOG will pay the firms in the local currency at the prevailing market price. More importantly, through this program, the BOG expects to double its gold holdings in the next five years.
Speaking at the launch of the program, Dr. Addison noted that the program will help reduce Ghana’s dependence on more expensive ways of building reserves.
“This event is indeed historic as it marks the first time the Bank of Ghana is embarking on a domestic gold purchasing to augment our foreign reserves. It therefore marks a significant change in the modus operandi of Bank of Ghana’s foreign exchange reserves management operations”.
A revolution to the small-scale gold mining sector
Also, Dr. Addison highlighted that the Gold purchasing program will bring revolution to the small-scale gold mining sector. He explained that Ghana’s domestic purchasing program will guarantee that small-scale miners receive a fair purchasing price for their gold. The program also promises to provide an incentive to formalize and move away from damaging environmental and social practices.
Furthermore, Dr. Addison believes the program will help formalize and improve ability to sell into formal gold markets. As a result, it will “reduce their vulnerability to illegal actors in the domestic and international gold supply chains”.
Meanwhile, the Governor indicated that BOG has engaged other domestic mining firms in collaboration with the Ghana Chamber of Mines to buy refined gold from their refineries. He revealed that after conducting an independent due diligence, only one gold aggregator has been selected for the program.
Enhancing currency stability
The Governor outlined several benefits of the of the program. According to him, it will pave the way for BOG to grow its foreign exchange reserves to foster confidence and enhance currency stability. It will also create a more attractive environment for foreign direct investments and economic growth.
Furthermore, he noted that the program will also enable the Bank leverage its gold holdings to raise cheaper sources of financing to provide short-term foreign exchange liquidity.
According to the Governor, BOG ‘s foreign reserves have grown steadily over the last fifteen (15) years to current levels of almost US$11.00 billion. However, he lamented that “the portion of gold reserves has remained unchanged at 8.77 tonnes”. Moreover, the average value of gold reserves held as a percentage of Gross International Reserves (GIR) currently stands at 6.14%.
Conversely, he indicated that unlike Ghana, the USA and other industrialized countries in the Eurozone have continued to hold large gold reserves. This is even after the gold standard era. According to the International Monetary Fund (IMF) and the World Gold Council, major industrialized countries held the largest volume of gold reserves as at April 2021. The major emerging markets followed with major developing countries lagging behind the curve.
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