A Finance and Tax Analyst, Nelson Cudjoe Kuagbedzi, has asserted that acquiring gold at prevailing market prices under the Bank of Ghana’s Domestic Gold Purchase Programme (DGPP) is essential to prevent illegal trading and curb smuggling into informal channels.
Addressing public concerns over financial adjustments linked to the central bank’s gold purchases, Kuagbedzi explained that offering prices below market value displaces precious metals from the formal economy. When official purchasing rates fail to reflect open-market realities, producers naturally seek alternative buyers, severely undermining national revenue collection and foreign exchange reserve building.
“Gold is acquired at the prevailing market rate because pricing below that level does not effectively reduce the cost to the State. It displaces the gold out of the formal economy. Pricing close to the bureau rate is also consistent with Section 3(h) of the Ghana Gold Board Act, 2025 (Act 1140), which requires measures to discourage illegal gold trading.”
Nelson Cudjoe Kuagbedzi,
Addressing Economic Vulnerabilities and Reserve Accumulation
Ghana’s persistent exchange rate volatility stems from high structural demand for foreign currency to import essential commodities, including fuel, pharmaceuticals, industrial machinery, and consumer technology. When demand for foreign exchange outstrips local supply, severe pressure mounts on the cedi, inflating domestic transportation, food, and manufacturing costs across household budgets.
To mitigate these systemic pressures, central banks globally are shifting reserve portfolios toward physical assets to de-dollarize reserves and guard against geopolitical fragmentation. Through the DGPP, Ghana successfully accumulated US$13.8 billion in foreign exchange reserves derived directly from domestic gold production rather than commercial debt.
Unlike external loans that yield temporary liquidity while imposing future debt service obligations, converting home-grown mineral resources into foreign exchange builds sovereign balance sheets organically.
“In simple terms, Ghana is attempting to use what it produces at home to strengthen its reserves rather than continually relying on external borrowing,” Kuagbedzi noted, highlighting the strategic distinction between debt-driven reserves and resource-backed asset accumulation.
Demystifying Accounting Adjustments versus Cash Losses
Public debate surrounding the DGPP intensified following reports referencing a GHS21.89 billion figure, which many observers misinterpreted as an outright cash loss. Kuagbedzi clarified that this figure represents an accounting adjustment mandated by International Accounting Standard (IAS) 21 rather than an actual cash outflow from state coffers.
Under IAS 21, gold bought in cedis at market rates is recorded on the Bank of Ghana’s balance sheet using official valuation exchange rates. The variance between the market acquisition rate and official financial reporting rates creates an exchange rate adjustment on paper.
Historical precedent underscores the danger of suppressing acquisition prices: following the 2021 introduction of a 3 percent withholding tax, official artisanal and small-scale gold exports plummeted from 39.3 tonnes to 3.4 tonnes in a single year a 91 percent collapse caused by gold fleeing formal declaration channels.
The GHS21.89 billion gross cost was further offset by a GHS5 billion government cost-sharing arrangement and GHS7.9 billion in realized gains from bullion sales. Consequently, the net cost carried in the central bank’s profit-and-loss account stood at GHS9.05 billion.
Operational Dynamics and Market Expansion in 2025
The magnitude of the accounting divergence expanded significantly during 2025 due to two main macroeconomic factors acting concurrently.
First, the cedi appreciated by approximately 40.7 percent over the year, which naturally widened the accounting gap as formal recording rates lagged behind rapid market shifts.
During 2024, the valuation divergence averaged under 5 percent, but in 2025, it averaged nearly 12 percent, widening further during the second half of the year.
Second, the operational volume of the DGPP doubled in scale, scaling up from 56.47 tonnes in 2024 to 110.99 tonnes in 2025, carrying a total value of US$11.4 billion. Applying a wider exchange rate divergence across twice the volume of physical gold generated the larger paper adjustment.
Ultimately, maintaining market-aligned purchase pricing remains the most viable policy mechanism to capture domestic gold output, secure foreign exchange liquidity, and protect Ghana’s extractive sector from illicit capital flight.
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