Bawumia reveals how gold-for-oil and gold-for-reserves programmes were conceived

New Patriotic Party (NPP) flagbearer Dr Mahamudu Bawumia shared the story behind Ghana's gold-for-oil and gold-for-reserves initiatives. The idea for these programs stemmed from a morning exercise when Bawumia considered how to tackle Ghana's severe foreign exchange issues resulting from the Russia-Ukraine war disrupting international capital markets.

Traditionally, Ghana spent around $3 billion each year on foreign capital markets, but the war left the country unable to secure needed funds, leading to a balance of payments crisis and cedi depreciation. Comparing Ghana's situation to that of Sri Lanka, Bawumia realized that the country's gold reserves at the Bank of Ghana were insufficient—only about 8.7 tonnes in 2021.

He believed that by purchasing gold with cedis, Ghana could address its foreign exchange challenges without relying on foreign currency. The proposal was unconventional, as there were no established economic models for this approach; it was purely out-of-the-box thinking. After a year of research, the Bank of Ghana decided to implement the gold purchase program, which enabled Ghana to acquire about $5 billion worth of gold within two years, significantly bolstering foreign exchange reserves and empowering the country to intervene in the foreign exchange market.

By the end of 2024, the International Monetary Fund lifted a cap on the Bank of Ghana's monthly foreign exchange market intervention from $80 million to $1 billion a month, easing pressure on the cedi through basic supply and demand dynamics.