Should BoG’s gold purchase programme be judged by profits or economic stability?
However, evaluating the programme primarily through its accounting costs risks overlooking a more fundamental question: did the economic benefits outweigh the financial costs?
The Bank of Ghana's Domestic Gold Purchase Programme, which has been scrutinized by the IMF for its potential impact on the central bank's balance sheet, warrants a broader evaluation. While the IMF's concerns regarding transparency, governance, and the program's quasi-fiscal costs are valid, it is crucial to consider the broader economic benefits it has brought to the country.
The program was not intended to be a profit-making venture but rather a tool for strengthening Ghana's foreign exchange buffers, supporting the cedi, and enhancing macroeconomic stability during a period of economic recovery. The IMF's assessment that Ghana consistently exceeded its Net International Reserve targets due to the programme's deployment is noteworthy.
Moreover, the programme's contribution to the rebuilding of official reserves and the Bank of Ghana's increased gold holdings, alongside the expansion of the government's reserve accumulation strategy, cannot be overlooked. The program also played a vital role in increasing gold-related foreign exchange inflows, which bolstered the country's reserve position and supported exchange rate stability.
These economic benefits, which extend beyond the central bank's balance sheet, include reduced imported inflation, lower costs of essential goods, preserved household purchasing power, improved investor confidence, and a more predictable environment for long-term investment. Importantly, exchange rate stability is crucial for maintaining Ghana's public debt at manageable levels, as the cedi's value is a significant factor in determining the debt's overall value.
In conclusion, while the financial costs of the programme should be acknowledged, they should not overshadow the substantial economic benefits it has delivered to Ghana. A stable exchange rate is a cornerstone of a healthy economy, and the Domestic Gold Purchase Programme has played a pivotal role in achieving this stability.
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