Bawumia feared Sri Lanka-style food crisis as Ghana battled forex shortages

Dr Mahamudu Bawumia, the flagbearer of the New Patriotic Party, expressed fears that Ghana could experience a crisis similar to Sri Lanka's due to the country's severe foreign exchange shortages. Bawumia highlighted his concerns as Ghana faced a balance of payments crisis following the Russia-Ukraine war, which prevented the nation from accessing international capital markets and limited its foreign exchange availability.

At a public event, he noted his particular concern over the situation in Sri Lanka, where essential goods shortages sparked widespread public protests during the economic turmoil. "I was concerned because I saw what was happening in Sri Lanka," Bawumia said, "where people were on the streets due to food shortages because they lacked foreign exchange to purchase food."

The Ghanaian economy faced a comparable risk, as the nation lacked sufficient foreign exchange to meet its economic demands. The situation was exacerbated by limitations on the Bank of Ghana's ability to intervene in the foreign exchange market, which was restricted to about $80 million per month despite the country's monthly demand for foreign exchange being significantly higher.

As a result, the exchange rate depreciated almost daily. Bawumia emphasized that this pressure on the cedi raised concerns about Ghana's capacity to finance imports and maintain economic stability. He credited the previous government's Gold-for-Oil programme and Gold-for-Reserves initiative for averting a more severe crisis. While selling Ghana's gold for dollars would not have fully resolved the immediate issue due to the central bank's restrictions on foreign exchange intervention, the Gold-for-Oil arrangement enabled the exchange of Ghana's gold directly for petroleum products while alleviating pressure on the country's limited foreign exchange resources.

By the end of 2024, Ghana had significantly improved its foreign exchange position thanks to the gold transactions, resulting in substantial reserves compared to the initial state.