Ghana’s forex exchange and gold reserve strategy carries high fiscal cost – S&P Global
Ghana’s strategy of accumulating foreign exchange (FX) reserves and gold carries a high fiscal cost that could erode recent improvements in its public finances, S&P Global, an international credit rating agency, has said. The post Ghana’s forex exchange and gold reserve strategy carries high fiscal cost – S&P Global appeared first on Ghana Business News .
S&P Global, the international credit rating agency, has cautioned that Ghana's approach to accumulating foreign exchange reserves and gold may incur significant fiscal costs that could undermine recent advancements in the country's public finances. The agency noted in its report on Ghana's economic conditions that, while the gold sector is driving the accumulation of reserves, implementing the Ghana Accelerated National Reserve Accumulation Policy (GANRAP) would impose substantial local currency expenses on the government.
GANRAP aims to utilize Ghana's gold resources to bolster national reserves, promote long-term macroeconomic stability, bolster confidence in the economy, and bolster the nation's ability to withstand external pressures. S&P Global estimates that implementing the program could cost between 0.8 per cent and 2.6 per cent of the country's annual Gross Domestic Product (GDP).
Although establishing GoldBod, a subsidiary of the Bank of Ghana, is expected to shield the central bank from losses related to gold trading, open-market sterilisation operations would continue to entail considerable costs. Consequently, the agency expects the Bank of Ghana to remain under financial strain. Furthermore, S&P Global projected that GoldBod's operational expenses would be around 1.5 per cent of GDP annually.
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