Ghana's gold-to-foreign-exchange model, introduced in July 2026, is being put to the test as the cedi and international reserves come under pressure. The model, which involves the Ghana Gold Board (GoldBod) relying on commercial banks and private off-takers to finance gold purchases, aims to generate foreign exchange for the market and reserves. According to Dr. Gideon Boako, Member of Parliament for Tano North and Deputy Ranking Member of Parliament's Finance Committee, the model has shown significant capacity to mobilize foreign exchange, generating $1.315 billion in August.
The new financing structure has seen GoldBod sell about $668 million directly to commercial banks and make approximately $647 million available to the Bank of Ghana for reserve accumulation. While this is a positive start, Dr. Boako cautions that one strong month is not enough to establish the model's resilience in less favorable market conditions. He identifies potential risks, including tighter commercial-bank liquidity, reduced financing from private off-takers, weaker gold production, disruptions to export shipments, and rising financing costs.
The concerns come against the backdrop of pressure on Ghana's external position. The cedi has depreciated by 9.5% in real bilateral terms against the US dollar on a year-to-date basis by September, while gross international reserves have become more volatile. Dr. Boako notes that the key test will be whether GoldBod can continue supplying sufficient foreign exchange to commercial banks and the Bank of Ghana without recreating the quasi-fiscal risks that the July reform aimed to eliminate.
The gold-to-foreign-exchange model was introduced to address the challenges faced by the previous system, which was criticized for its quasi-fiscal risks. Under the new arrangement, GoldBod is responsible for purchasing gold from local producers and selling it to commercial banks and the Bank of Ghana. The proceeds from gold exports are expected to generate foreign exchange for the market and reserves, helping to stabilize the cedi and boost international reserves.
Dr. Boako's concerns about the model's resilience are shared by other stakeholders, who are closely monitoring the situation. The model's success is crucial for Ghana's economic stability, as the country relies heavily on gold exports to generate foreign exchange. Any disruptions to the model could have significant implications for the economy, including further depreciation of the cedi and reduced international reserves.
The Bank of Ghana and GoldBod are working to address the challenges facing the model. The Bank of Ghana has been monitoring the situation closely and has taken steps to ensure that the model is functioning smoothly. GoldBod has also been working to increase transparency and accountability in its operations, including publishing regular reports on its activities.
The gold financing model is a critical component of Ghana's economic strategy, and its success will be closely watched by stakeholders. The model's ability to mobilize foreign exchange and support the cedi and international reserves will be crucial in determining Ghana's economic prospects. Key points to watch include the model's resilience in less favorable market conditions and its ability to address potential risks.
Key points
- The gold-to-foreign-exchange model's resilience will be tested in less favorable market conditions.
- The model's success is crucial for Ghana's economic stability, as the country relies heavily on gold exports to generate foreign exchange.
- The Bank of Ghana and GoldBod are working to address the challenges facing the model and ensure its smooth functioning.
