The $80m IMF FX intervention cap that broke the cedi, and the gold policy that fixed it

For two years, the Ghanaian cedi suffered greatly, causing widespread criticism of the government. Everyone blamed speculators, the Bank of Ghana, and the Finance Minister for the economic crisis, but former Vice President Dr. Mahamudu Bawumia revealed the real reason behind the cedi's decline. The International Monetary Fund (IMF) imposed a $80 million monthly cap on Ghana's foreign exchange intervention, restricting the Bank of Ghana from purchasing enough dollars to support the currency.

This limit left Ghana with only $960 million for a whole year, while the country's monthly import bill for essentials far exceeded that amount. As a result, high demand for dollars led to a continuous depreciation of the cedi. The IMF's goal was to build reserves, but the $80 million cap created artificial scarcity and panic, further devaluing the cedi.

Dr. Bawumia proposed two unconventional ideas: Gold-for-Oil and Gold-for-Reserves. The first idea involved trading gold directly for oil to bypass the broken dollar market and prevent the pumps from running dry. The second idea, a masterstroke, was to use Ghana's gold reserves to buy gold instead of relying on foreign currency as reserves.

This approach was initially met with skepticism, but after a year of research, the Bank of Ghana approved the plan. Over two years, Ghana purchased $5 billion worth of gold, increasing the country's gold reserves from 8.7 tons to over 31 tons. This surplus allowed the IMF to lift the $80 million intervention cap in January 2025, enabling the Bank of Ghana to inject over $1 billion a month into the market.

This transformation from $80 million a month to $1 billion a month marked a significant improvement in Ghana's economic stability, demonstrating that sometimes, unconventional thinking and resource utilization can be the key to economic recovery.