Macroeconomic stability at last? An odyssey of economic upheavals in the 4th republic and GoldBod experiment

By Akwasi Agyeman BRITWUM (PhD)

Following the overwhelming support for transition into a democratic state as was affirmed by the results of the referendum held in April, 1992 with 93percent of voters in favour of the new constitution, Ghana’s Fourth Republic was ushered as the ultimate hope to end the blistering cycle of endemic poverty, which had necessitated several structural reform programs.

The democratic optimism, strangely, only appeared to gestate the much-hated reincarnation of prior decades’ severe volatility characterized by recurring economic shocks, currency depreciation, chronic and acute fiscal and balance of payment crisis, among others.

From the various economic recovery programs aimed at stabilizing the economy and attempting to mitigate social cost post-independence to the 2022 eye-lowering debt default, Ghana has grappled, albeit only managing to show comic results, with restoring economic stability.

The John Mahama reloaded agenda, which is touted as the redemption term of the President, however, has witnessed an unconventional policy shift with the launch of the Ghana Gold Board (GoldBod).

Whereas policy makers tout the gold-backed intervention aimed at stabilizing the Ghana Cedis and revamping foreign exchange liquidity as the game-changer, there remains more that strains the limits of logic and economic rationality. Does this initiative mark the turning point that generations have hoped for or simply, another chapter in Ghana’s long economic odyssey?

The search for stability

Ghana’s macroeconomic trajectory in the Fourth Republic can be described at best, as dynamic, marked by periods of significant growth, but punctuated with some shortcomings and structural adjustments.

Early years (1993 – 2000)

This period has mainly been characterized by a shift to market-oriented policies. It follows the excruciating years of structural adjustment programs in the 1980s, and has heralded a continuation of market liberalization, privatization and fiscal restructuring policies, often with interventions from the International Monetary Fund (IMF) and the World Bank. During this era, the initial focus was stabilizing the economy, managing the national debt and reducing inflation.

Notwithstanding some successes with some economic growth, the period was confronted with challenges like unsustainable debt levels, currency depreciation and reliance on international aid. During this era, the initial focus was stabilizing the economy, managing the national debt and reducing inflation. The country’s debt-to-GDP ratio, for instance witnessed a significant increase in the 1990s, reaching a high of 74.46percent in the year 2000.  Table 1 presents some key macroeconomic data for Ghana during the early years of the Fourth Republic.

Year	GDP Growth Rate (%)	Inflation Rate (percent)	Exchange Rate (GHS/USD)	Debt-to-GDP Ratio (percent)	Fiscal Balance (percent of GDP)
1993	3.3	25.1	0.67	78.5	-5.87
1994	5	24.9	0.87	79.1	-5.45
1995	4.5	59.3	1.29	73.7	-4.86
1996	4.1	27.7	1.48	69.8	-6.03
1997	4.7	20.6	2.35	69.3	-6.62
1998	4.8	19.3	2.38	77.5	-5.69
1999	4.4	12.4	2.76	87.8	-6.09
2000	3.7	40.7	6.98	96.2	-4.29

Source: Author’s compilation from World Bank DataBank, IMF World Economic Outlook (1993–2000), Ghana Ministry of Finance budget reports, and CountryEconomy.com.

Note: Exchange rate figures from 1993 to 2000 are presented in post-2007 redenominated Ghana Cedis (GH₵), where GH₵1 = ₵10,000 (old Cedis).

From Table 1, Ghana’s fiscal deficit ranged from -4.3percent to -6.6percent of GDP between 1993 and 2000. Thus, Ghana ran a consistent fiscal deficit from 1993 to 2000, which implicitly indicates a structural imbalance between revenue and expenditure. Therefore, financing these deficits often required falling on external borrowing and increasing public debt. It is therefore appropriate to state that these persistent deficits may have contributed to currency depreciation, inflation and the limited fiscal space for development spending.

Between the years 1993 and 1999, the Cedi witnessed a gradual depreciation against the United States Dollar from 0.67 GHS/USD to 6.98 GHS/USD, representing a more than ten- fold decline in the value of the Cedi against the US Dollar. Interestingly, this trend is a reflection of underlying economic challenges which include trade imbalances, inflationary pressures and fiscal deficits. The depreciating currency led to higher import prices which contributed to inflation, recording a high of 40.7percent in the year 2000.

The depreciating Cedi also had profound implications for debt servicing, notably external debts denominated in foreign currencies. The adverse impact of this is the high cost of repaying foreign debt, even if the nominal foreign currency obligation remains unchanged. Significant pressure is placed on the national budget even as more Cedis were needed to serve the same US Dollar denominated obligations. The dire consequences were the increased fiscal deficits, higher domestic borrowing to fill financing gaps, increased fiscal deficits and crowding out of development expenditure. And the structural implications? Horrifying! The country’s vulnerability to external shocks, foreign currency shortages and the need for frequent intervention from the IMF were exacerbated.

A chronicle of economic upheavals in the Fourth Republic

It may perhaps be described as a rollercoaster of economic booms as the inception of the Fourth Republic in 1993 witnessed the Ghanaian economy traveling through a complex maze of macroeconomic highs and lows. The decades following have been marked by both promises of bliss and perils that seem to pause for long. Thus, the country has traversed through reform-led stabilization efforts and resource booms to external shocks and debt crisis. In this section, I have unpacked a chronicle of economic upheavals from the 1990s to the 2020s and further offered a panoramic view of the significant factors that seem to have shaped Ghana’s fiscal and monetary landscape.

1990s: Post-ERP fiscal discipline and monetary reforms, currency instability

Birthed out of the reforms initiated under the Economic Recovery Programme (ERP) and the Structural Adjustment Programmes (SAPs) of the 1980s, the Fourth Republic tested the durability of the groundwork for macroeconomic stabilization arising from these reform programmes.

A notable development in this era was the fiscal reforms which saw tax revenue doubling to 12.5percent of GDP by 1991, largely driven by the broadening of the tax base, the reduction of reliance on cocoa export duties and the introduction of the Value-Added Tax (VAT) in 1995.

However, democracy which should have been a blessing rather slowed some reforms exemplified by the failed rollout of VAT as within three months of its passage, the Parliament of Ghana passed two laws to reinstate the otherwise redundant sales and services tax, which VAT was intended to replace. The suspension of VAT in 1995 buttresses the notion among some academicians of a never-ending structural challenge that there seem to be a conflict between democratic accountability and reform rigor. Again, due to political pressures around the 1992 elections (as is often the case during election years), there was a triggering of fiscal slippage resulting in deficits reaching 9percent to 10percent of GDP. Domestic debt also ballooned tenfold by 1991.

Another development during this era was the chronic depreciation of the Cedis and the persistent current account deficits. The economy became so vulnerable to global price swings due to the reliance on primary exports of cocoa, gold and timber. Public confidence was eroded heavily and inflation went berserk as the Cedis’ devaluation was a regular feature. Inflation peaked at 59.3percent in 1995 which prompted interest rates hikes at the time as well as open market operations to mop up excess liquidity. The devalued Cedis, within that period, featured the proliferation of zeros necessitating the need for redenomination a decade later. Real interest rate was high as a measure that tackles inflation but this also stifled private credit.

2000s: Commodity boom, volatility, and the advent of inflation targeting. What a portfolio!

The 2000s marked the period when there were recorded commodity booms. The period ushered macroeconomic optimism watered by the global commodity boom. There was a substantial appreciation in the prices of gold and cocoa. The phenomenal rise in price of these commodities contributed to strong external balances and revenue inflow for the country. The Bank of Ghana in 2002 adopted an inflation targeting framework which was to anchor and strengthen monetary discipline. As well as the redenomination of the Cedis in 2007, these reforms were intended to improve transactional efficiency and also to boost confidence in the monetary management of the country.

During the period, the country was also ushered to the international capital market when Ghana first entered the Eurobond in 2007 (this would later lead to an embarrassing debt unsustainability and payment defaults).

Unfortunately, our vulnerability to the 2008 financial crisis was buoyed by the country’s reliance on raw materials. During the 2008 global financial crisis the prices of cocoa and gold were almost halved. Furthermore, real fiscal discipline remained elusive as acrimonious electoral cycles always triggered budget overruns. Public sector wage bill and subsidies also placed enormous pressure on the national budget. By the end of the decade, Ghana had accumulated considerable external debt, albeit non-concessional which contributed to future challenges with debt sustainability. When in 2007 Ghana adopted an inflation -targeting regime in order to prioritize price stability, there was support from the Bank of England.

At the time, the then Advisor to the Governor of the Bank of Ghana, Maxwell Opoku-Afari, opined that Ghana had studied inflation targeting models of countries like Brazil, Turkey, South Africa and Chile. This policy reform shifted monetary policy to interest rate adjustments, from direct controls. Fiscal dominance, however, undermined the effectiveness of this policy of interest rate adjustments.  Generally, fiscal dominance occurs when due to fiscal policy pressures such as high budget deficits and debt levels, the central bank’s ability to conduct independent monetary policy is constrained.

In the case of Ghana, persistent budget deficits which necessitated the need for deficit financing resulted in situations where the efforts of the central bank to control inflation through interest rate adjustments were compromised. This situation was loudly pronounced when the central bank had to finance government deficits through printing currency notes, which increased money supply and counteracted with the tightening effects of higher interest rates.

2010s: Oil bonanza and fiscal recklessness

Undoubtedly, the discovery of oil in 2007 and the subsequent commercial production in 2010 was an epoch-making as far as the economic growth of Ghana is concerned. Almost immediately, subsequent to the commercial production, real GDP growth surged, peaking at over 14percent in 2011. This positioned Ghana in just a brief period as one the of the fastest growing economies in the world. The government created the Ghana Petroleum Funds (which consisted of the Ghana Stabilization Fund and the Ghana Heritage Fund) which was purposely to ensure inter-generational equity and serve as a buffer for future oil shocks.

The euphoria surrounding the commercial production of oil, however, faded quickly. The management of oil revenue fell short of expectations amid weak institutional capacity, grotesque and overoptimistic projections of oil revenue and the canker of growing fiscal indiscipline. The last kill was the ballooning of the wage bill again, following the implementation of the Single Spine Salary Structure (SSSS) in the year, while the quality of public investment deteriorated.

Interestingly too, the 2012 election cycle saw the public wage bill for public sector workers increasing by 75percent amid unsustainable energy subsidies. Equally worrying was the fact that public debt surged from 34percent of GDP as of 2010 to 63percent of GDP as of 2019, largely driven by the issuance of Eurobond (a staggering US$10 billion by 2018) and energy sector bailouts. The banking sector was not left out in the economic quagmire of the decade.

Non-performing loans hit 21percent in 2017, and this partly necessitated the US$2.2 billion banking sector cleanup. The resultant fiscal imbalances, amid persistent current account deficits which averaged 6.5percent of GDP and currency depreciation (the Ghana Cedis fell by 30percent in 2014), escalated debt levels and waned investor confidence prompted the return to the IMF in the year 2015 under a US$918 million Extended Credit Facility. At the time, the debt-to-GDP ratio had inched past 70percent. Consequently, there was a disproportionate servicing of debt in relation to domestic revenue.

2020s: The Covid curse, Eurobond hangover and ghana’s fiscal free fall

The current decade can best be described as the perfect storm for economic implosion. It marked the era when Ghana really danced on the fiscal edge and was tattooed with bailouts and broken promises and further marked Ghana’s descent into the debt abyss. The country’s recent economic upheavals have rattled the foundations of trusted economic theories like the Capital Asset Pricing Model, which for generations stood tall in the financial world, hailing government securities as the gold standard of risk-free assets. That orthodoxy has now been shaken to its core, forcing even ivory tower economists to rethink what risk-free truly means in the context of emerging markets.

Ghana’s economy contracted by 1.7percent in 2020 and fiscal deficits widened to 15percent of GDP largely due to health spending and revenue shortfalls. What is more, inflation spiked to 54percent in 2022, which was the highest in 21 years. During the pandemic period, global disruptions shrank exports, remittances and foreign direct investment. The Bank of Ghana in response financed portions of the deficit, which is an unconventional measure that stoked inflationary pressure. Between 2021 and 2022, Ghana faced a full-blown sovereign debt crisis.

Unfortunately, with access to capital markets effectively shut due to successive credit rating downgrades, Ghana defaulted on portions of its Eurobond debt (US$28 billion). Almost immediately, external reserves dwindled and the Ghana Cedis depreciated sharply, which pushed inflation to 54percent in 2022. With no political capital to push for the enactment of the Electronic Levy in order to widen the tax base, Ghana applied and secured a US$3 billion IMF programme in 2023. The programme focused on fiscal consolidation, domestic revenue mobilization and macroeconomic stability.

Simultaneously too, the country launched the Domestic Debt Exchange Programme (DDEP), which witnessed domestic debt restructuring of 50percent haircut for local bondholders. Thus, Ghana began negotiating its external debt under the G20 Common Framework. By 2024, there were recovery signals as the reforms stabilized the country’s reserves to 4 months of import cover and narrowed current account deficits.

Boom, bust, repeat – The endless loop of reform and fragility of Ghana’s Fourth Republic

Undoubtedly, the rhythm of Ghana’s Fourth Republic has been one of crisis, reform and relapse. It is noted, without pride, as an economic pendulum that has oscillated between reform forward and vulnerability backward. The economic narrative has been one of reform-driven recoveries undone by commodity shocks, a cyclical electoral fiscal laxity and structural bottlenecks. There have been temporary respites in the IMF programmes and commodity windfalls. However, enduring and lasting solutions require the diversification of exports, the depoliticizing of fiscal policy and leveraging the revenues from oil and gold for industrialization. Should reforms currently being experienced outlive crisis management, there is the need for the country to break the boom-bust cycle.

The Ghana Cedis under siege amid exchange rate instability and import dependence

Ghana’s economy is largely import-driven as it depends heavily on imports particularly petroleum, machinery and food. These structural identities have placed the Ghana Cedis under so much continuous pressure and this has had significant implications for inflation, standard of living and economic stability. As a result, the macroeconomic landscape has been shaped by persistent exchange rate volatility.

Ghana’s heavy reliance on imports

Factually, Ghana’s economic narrative cannot be told meaningfully without addressing the persistent fragility of its currency, the Ghana Cedis. As discussed in the preceding lines, much of Ghana’s Fourth Republic has witnessed its currency, the Ghana Cedis enduring recurring bouts of depreciation and unenviably becoming one of the most visible and perhaps, emotionally charged symbol of a broader economic malaise. The crust of this problem of currency volatility lies in a deep structural weakness. From time immemorial, Ghana imports a substantial share of essential goods and this has created a constant demand for foreign exchange and has exposed the economy to external shocks. Thus, this vulnerability has exposed the Ghana Cedis to global shocks and capital outflows.

In 2023 for instance, Ghana imported a total of US$5.26 billion worth of mineral fuels and oil (a broad category of energy-related products), which accounted for 32.1percent of its total imports. Ghana therefore depends heavily on imported energy to power its electricity generation, industry and transportation. Next to minerals, fuels and oil is machinery which is the second largest import category. The value of imported machinery is estimated at US$1.55 billion which constitutes 9.47percent of imports in 2023. These imports appear indispensable as they are important for various sectors such as manufacturing, construction and infrastructure.

Vehicles and plastics, as of 2023, also constituted a key import segment accounting for approximately US$1.21 billion, constituting 7.39percent of total imports. Plastics also accounted for approximately US$660.51 million constituting 4.03percent of total imports. Notwithstanding Ghana’s abundant arable land and favorable climate, the country still imports US$2 billion of foods (rice, wheat, chicken and sugar) annually. Indisputably, agricultural productivity in Ghana is on the decline owing to outdated farming methods, post-harvest losses which estimates are up to 40percent, compounded by limited domestic food supply which has compelled the reliance on imported foods.

Impact of the depreciation of the Ghana Cedis on inflation and living standards

In recent years, the Ghana Cedis has lost more than half of its value against the United States Dollar. This depreciation almost instantly fuels inflation as most imported goods are priced in foreign currency. In early 2024 for example, inflation surged to over 40percent year-on-year and this was largely driven by rising food and fuel prices. Depreciation of the Ghana Cedis therefore increases the cost of imported goods such as petroleum, food, agricultural inputs and machinery. This in turn raises the cost of production and consumer prices across the economy. Purchasing power is also eroded leading to decline in living standards accounting for many Ghanaians struggling to afford basic necessities like food. Consequently, there is also a sharp decline in the demand for non-essential goods, which contraction creates ripple effects in sectors such as retail, manufacturing and agribusiness.

Historical attempts to stabilize the Cedis

Over the years, the Bank of Ghana and successive governments have made several attempts to stabilize the Cedis. Results have been largely mixed. There has been implementation of tight monetary policy with the Bank of Ghana frequently raising interest rates to combat inflation and get the Cedis stabilized. Monetary tightening by the central bank implies that steps are taken to reduce money supply or slow down the expansion of credit. This is done by raising interest rates (the Monetary Policy Rate), selling of government securities and increasing reserve requirement of banks.

This is done primarily to control inflation, stabilize our currency and prevent asset bubbles (stopping the unsustainable rise in the prices of assets such as land and buildings more than its actual or intrinsic values, occurring mostly due to speculation). In 1990 for instance, real interest rate turned positive which impliedly resulted in interest rates being high enough to outpace inflation. Evidently, this was seen as a sign of improved monetary discipline which helped to attract foreign investment and domestic savings in treasury bills and bonds.

Again, the Bank of Ghana has employed forex forward auctions and further directly intervened to manage exchange rate volatility. The central bank has often used specific tools to reduce fluctuations in Ghana Cedis-US Dollar exchange rate through forward auctions and direct interventions. Forward auctions are competitive sales of foreign currency by the central banks to commercial banks and key market players for future delivery, say in 30 or 60 days. This reduces speculation as importers and banks are able to plan ahead being made aware of the rate they will get in future from the central banks.

Forward auctions also bring predictability to the forex market and reduce speculation. By reducing speculation, incidences of panic buying or selling of foreign currency are curtailed, enabling businesses to manage currency risk better. With direct interventions, Bank of Ghana enters the forex market directly and either buy or sells foreign currencies from its reserves in order to influence the Ghana Cedis exchange rate.

Impliedly, if the Ghana Cedis is depreciating too quickly, the central bank may sell some foreign currencies to increase supply and support the local currency. Conversely, if the Ghana Cedis is appreciating too fast, the central bank may buy some foreign currencies to prevent an imbalance. This ultimately helps to prevent abrupt swings that could disrupt inflation and trade and also maintain market confidence.

Fiscal consolidation efforts to reduce fiscal deficits and public sector spending is another tool that have been employed variously to stabilize the Ghana Cedis. Fiscal imbalances are often attributed as a contribution to the weakness of the currency. In the year 2023, the country’s fiscal deficit was reported at GH¢61.475 billion, which was equivalent to 7.7percent of GDP. To finance such substantial deficits, the country has resorted to domestic and international borrowing which exerts downward pressure on the Ghana Cedis. This explains the reason for the Ghana Cedis’ 27.8percent depreciation in 2023.

To tackle the problem of fiscal deficit, governments in the Fourth Republic have implemented measures as expenditure rationalization (where efforts are made to streamline public spending and focusing on essential services), revenue mobilization which includes initiatives to broaden the tax net and enhance tax compliance and debt restructuring (intended to reduce the debt burden and associated interest payments). In recent times, the government’s fiscal consolidation efforts have yielded positive results. The Ghana Cedis, as of May, 2025, has appreciated by approximately 24.1percent against the US Dollar. Inflation has also witnessed a decline, reducing from 22.4percent in March to 21.2percent in April, 2025.

Another strategy that has been employed to stabilize the Ghana Cedis is reserve accumulation. This involves bolstering the country’s foreign exchange reserves as a pivot in enhancing economic stability and investor confidence. This strategy leverages our earnings from exports like cocoa and gold, remittance inflows and support from our international partners.

In 2023 for example, the country’s gross international reserves experienced a significant increase from US$1.45 billion in 2022 to US$3.66 billion by the end of that year (Gross International Reserves including encumbered assets and Petroleum Funds in 2023 was US$5.9 billion and our Net Usable Reserves, excluding the encumbered assets and Petroleum Funds was US$3.66 billion). This excluded petroleum and encumbered assets. Encumbered assets are part of the country’s reserves that are pledged or committed and are therefore not available for immediate use (collateral for loans or financial instruments, funds tied up in derivative contracts).

Ghana’s Petroleum Funds are sovereign wealth funds such as the Heritage Fund and the Stabilization Fund that are created to manage and invest oil revenue for the long-term benefit of the nation. The Petroleum Funds are therefore not readily liquid for the day-to-day forex interventions or macroeconomic management. The reserves as a tool for currency stabilization ensure that there is a buffer against external shocks. The Bank of Ghana is also better positioned to control inflation through the implementation of monetary policies with increased reserves. Finally, increased reserves position improves the country’s credit worthiness thereby facilitating access to international capital markets and attracting foreign investment.

Finally, a key strategy that has been employed to stabilize the Ghana Cedis is the implementation of regulatory reforms. Such regulatory reforms impose limits on forex transfers and curbs speculative activities that can lead to currency volatility. The bedrock of the country’s forex regulatory regime is the Foreign Exchange Act, 2006 (Act 723). By this legal backing, the Bank of Ghana employs limits on forex transfers through caps on amount of foreign currency that can be assessed for travel purposes, transaction thresholds where forex bureaus are restricted from buying or selling more than US$10,000 in a single customer transaction.

Regulatory reforms have improved reserve management by controlling the forex outflows in maintaining adequate foreign exchange reserves, which are crucial for stability. The regulatory reforms have also reduced volatility by limiting large and speculative forex transactions by lessening excessive fluctuations in the Ghana Cedis exchange rate.

The establishment of the GoldBod – A new experiment

As a way of harnessing the full potential of the large deposits of gold in the country, Ghana has established the Gold Board (GoldBod). The object of the GoldBod is to regulate the country’s gold industry especially the artisanal and small-scale mining sector. The establishment of the GoldBod is also intended to curb the menace of illegal mining activities, reduce smuggling, enhance foreign exchange earnings and stabilize the Ghana Cedis ultimately.

Origin and goals of the GoldBod

The establishment of the GoldBod was necessitated by the need to address the challenges which unregulated gold mining and trading activities posed. The Ghana Gold Board Act, 2025 (Act 1140) legally established the GoldBod which succeeded the Precious Minerals Marketing Company by inhering its assets, liabilities and workforce. GoldBod has a significantly expanded mandate to oversee the entire gold value chain in the country. This includes the buying, selling, assaying, refining and exporting of gold.

The goals of GoldBod include formalizing the small-scale gold mining sector (which hitherto operated in a fragmented and largely informal manner), combating gold smuggling and illegal mining, increasing transparency and traceability in gold trading, supporting the accumulation of gold reserves by the central bank and promoting value addition and economic transformation.

The projected impact of the establishment of GoldBod on Ghana’s economy

The establishment of the GoldBod is expected not only to be the game-changer in Ghana’s gold sector but also to have several positive outcomes.

Firstly, the establishment of the GoldBod is expected to increase Ghana’s foreign exchange reserves. Thus, formalizing the gold trade is expected to boost foreign exchange inflows. As of 2024, approximately US$5 billion of the country’s gold exports were attributed to legal small-scale mining, out of the total of US$11.64 billion, representing a growth of 53.2percent. With the establishment of the GoldBod, these figures are expected to rise further.

Also, the establishment of the GoldBod is expected to curb illegal mining and smuggling of gold. With the formalization of the small-scale mining sector, the GoldBod is mandated to drastically reduce illegal gold mining activities (referred at as ‘galamsey’) and illicit exports of gold. This has historically deprived the country of billions in revenue.

Again, the establishment of the GoldBod is expected to support the stability of the local currency, the Ghana Cedis. As the GoldBod purchases all gold of small-scale miners in Ghana Cedis and exports and earns United States Dollars, the Bank of Ghana benefits from the increasing forex liquidity. This will eventually help to stabilize the Ghana Cedis against persistent depreciation.

Furthermore, GoldBod will ensure value addition and subsequent economic transformation in the country. As the GoldBod moves from exporting unrefined dore bars to refined bullion which will be done through local refineries, the country will be able to gain higher export values, create jobs and ultimately develop a more sustainable mining industry.

An evaluation of GoldBod’s impact

The GoldBod has initiated significant reforms in Ghana’s gold sector, especially the artisanal and small-scale mining industry since its establishment in 2025. Most importantly, therefore, this is expected to boost the inflow of foreign exchange, improve regulatory supervision and enhance socio-economic development. Some of GoldBod’s early successes includes;

Increasing forex inflows and reducing pressures on reserves

Due to its centralization of gold exports, the country has benefited phenomenally from foreign currency earnings which has helped to stabilize the Ghana Cedis. As the GoldBod mandates small-scale miners to sell gold exclusively through aggregators licensed by them, the country has been able to plug major leakages from smuggling and informal exports that has previously deprived Ghana from vital forex inflows. Gold exports from the small-scale sector contribute around 33percent of the total gold produced in the country. Dr. Cassiel Ato Forson, the country’s Finance Minister has indicated that as of mid-May 2025, the Ghana Cedis had appreciated by 16.7percent year-to-date.

This he attributed to the role of the GoldBod in accumulating gold reserves and improving forex liquidity. The Bank of Ghana for instance, through leveraging of increased gold revenues has injected US$264.4 million into the forex market in 2025, to stabilize the Ghana Cedis. The country’s reserves too have shot up to four months of import cover, compared to previous years when it went as low as one month of import cover.

Improved traceability through enforcement and regulation

Due to the implementation of stringent measures by the GoldBod, the traceability of gold exports from Ghana has been enhanced. This is largely due to the licensing, assaying and exportation process and further ensuring that traded gold is verifiable and compliant with international standards. Through the implementation of these stringent measures, issues of smuggling and revenue loss through gold exports are curtailed.

The consolidation of the small-scale gold trade under the GoldBod has therefore helped to consolidate transparency, through the revocation of the previous export licenses of small-scale gold traders (through the Ghana Gold Board Act, Act 1140), and strengthening of the Ghana Cedis. Specifically, therefore, there is a comprehensive tracking of gold transactions, standardized assay and valuation process, the licensing and supervision of aggregators and traders and the mandatory channeling of foreign currency receipts through the GoldBod to enhance forex management.

Socio-economic impacts, job creation and support for mining communities

Gold mining alone contributes to 7percent of Ghana’s GDP. The sector also provides about 1 million jobs to individuals. GoldBod has as an aim the improvement of the working conditions and ensuring fair compensation of these workforce. It also aims to promote sustainable practices within the mining communities in Ghana. GoldBod, again, aims to provide comprehensive training for miners to improve their skills and their commitment to health and safety standards.

It further aims to facilitate access to bespoke mining equipment and financing and subsequently help miners to increase their productivity and reduce environmental harm. Also of utmost importance is an aim to support community development initiatives in regions where gold is mined by providing healthcare, education and other infrastructure projects.

Finally, with an aim to promote sustainable and eco-friendly mining techniques, GoldBod seeks to mitigate deforestation, water pollution and soil degradation which is associated with illegal mining. Through these interventions, the GoldBod seeks to transform artisanal mining from a largely informal and hazardous activity to a more productive, safe and environmentally responsible livelihood to improve the living standards for mining communities.

Risks and limitations of the GoldBod initiative

Obviously, the establishment of the Ghana Gold Board by the government of President John Mahama represents one of the boldest experiments of harnessing the country’s gold resources to stabilize the Ghana Cedis and also boost foreign exchange inflows. Even though early results, sterling thus far, shows promise, several risks and limitations abound that warrant a careful consideration in order to ensure the long-term sustainability of this initiative for broader economic impact.

Currency stability and the sustainability of gold purchases

From May, 2023 to April, 2025, the Bank of Ghana has significantly increased its gold reserves from 8.78 tonnes to 31 tonnes. This is valued in excess of GH¢46 billion. It is believed that the accumulation is a contributory factor to the 16.7percent appreciation of the Ghana Cedis as of May, 2025 and the improvement of the country’s forex reserves covering four months of import cover.

However, there is the lingering doubt about the long-term sustainability of employing gold purchases to ensure currency stability. The stability of the Ghana Cedis obviously will not depend on gold inflows solely but on a broader range of macroeconomic fundamentals such as fiscal discipline, external debt management and export diversification in the medium to long-term. This is attributed to the fact that reliance on gold reserves as a buffer is vulnerable to fluctuations in global gold prices and export volumes.

Much expectedly, concerns have been raised about the sustainability of the approach and the purchases of gold by the state which contributes excessive liquidity to the economy, undermining monetary policy objectives. Impliedly, the long-term effectiveness of using gold reserves to stabilize the currency remains uncertain, especially in the face of external shocks and market volatility. Before the establishment of the GoldBod, licensed aggregators bought gold from small-scale miners using Ghana Cedis, injecting liquidity into local mining communities.

Exporters after purchasing the gold from the aggregators then sold the gold on international markets, bringing in foreign exchange, but typically retained a large portion of the forex earnings abroad or converted only what was required locally. The fragmented nature of the system meant the Bank of Ghana had less visibility and control over how much forex came in or how much liquidity was circulating from gold purchases.

After its establishment, GoldBod now aggregates and channels a much larger volume of gold for the central bank’s reserves than individual exporters did. In 2025, for example, BoG reportedly sourced over USUS$800 million worth of gold via GoldBod, which level of intervention dwarfs past aggregator activity. This increased scale means larger and more frequent injections of Ghana cedis into the economy, intensifying and ‘aggravating’ the liquidity impact.

Therefore, unlike the previous private exporter-led model, GoldBod’s operations are closely tied to the Bank of Ghana’s reserve management and monetary policy objectives. Consequently, the central bank’s direct Ghana Cedis payments for gold constitute quasi-monetary expansion if not sterilized, that is stirring essentially a monetary base growth without corresponding withdrawal mechanisms. In the period preceding GoldBod’s setting up, the central bank did not have to sterilize gold transactions because they were outside its direct balance sheet.

However, under the GoldBod framework, if BoG pays in Ghana Cedis for gold but does not simultaneously mop up that liquidity through for example, open market operations or reserve requirements, it undermines its own inflation-targeting and monetary tightening strategies. Furthermore, the current GoldBod setup also risks blurring fiscal and monetary boundaries, since forex from GoldBod may support government imports or debt servicing, thereby intertwining the central bank’s operations with fiscal objectives, hence making independent inflation control harder.

Volatility of global gold prices

In recent times, global gold prices have experienced significant fluctuations, rising from approximately US$2,065 per ounce in January, 2025 to over US$2,540 by mid-May,2025, representing a 23percent increase. While such surges can benefit Ghana’s export revenues, they also expose the country’s economy to volatility. A sudden decline in gold prices could reduce export earnings, strain foreign reserves, and weaken the Ghana Cedis. Moreover, high gold prices have incentivized illegal mining activities, leading to environmental degradation.

The risk of over-reliance on the extractive sector as a policy crutch

Ghana’s economy is heavily dependent on extractive industries, with gold, crude oil, and cocoa accounting for approximately 75percent of total exports. This over-reliance therefore makes the economy vulnerable to external shocks, such as commodity price fluctuations. A downturn in global gold prices or disruptions in mining activities could have significant adverse effects on fiscal stability and economic growth. Diversification of the economy is therefore very essential to mitigate these risks and ensure sustainable development.

Recommendations on de-emphasizing reliance on the GoldBod initiative to stabilize the economy

While Ghana’s gold-based strategies have contributed to short-term economic stability especially for 2025, several risks and limitations threaten their long-term sustainability. Addressing such challenges requires implementing robust legal frameworks to ensure transparency and accountability in gold transactions.

Also, there is the need to enhance institutional capacity to manage and regulate the gold sector effectively.

Moreover, there is the indispensable need to diversify the economy to reduce dependence on extractive industries and build resilience against external shocks.

Better still, there is the need to strengthen the foundations of fiscal sovereignty through domestic revenue mobilization. Ghana’s tax-to-GDP ratio hovered around 13percent in 2022, which was well below the Sub-Saharan Africa average of 15–18percent and far from the 20percent+ needed to fund development sustainably. Over-reliance on indirect taxes, exemptions, and a narrow tax base has eroded revenue potential, increasing dependence on borrowing. It is recommended that the tax base should be broadened. Ghana must aggressively expand its tax net, especially by formalizing the vast informal sector.

According to the Ghana Statistical Service, over 80percent of the labor force operates informally, yet contributes minimally to direct tax revenues. It is also important that the tax administration is digitized. Scaling up digital platforms like e-VAT and Ghana.Gov can enhance transparency, reduce leakages and improve compliance. It is a matter of national interest to curb tax exemptions which has almost become a menace.

Tax exemptions cost Ghana over GH¢5 billion annually, or about 1.5percent of GDP, according to the Ministry of Finance (2021). A more transparent and criteria-based exemption regime is needed urgently to stem this. Local governments (MMDAs) could raise significant revenue from property taxes if collection is modernized and enforced. Ghana reportedly collects less than 0.03percent of GDP in property tax, one of the lowest globally. Besides GoldBod, too, better auditing and renegotiation of extractive sector contracts, particularly in gold, oil and bauxite, can secure more rent for the state.

Finally, expenditure rationalization and fiscal discipline are key. Ghana’s fiscal deficits exceeded 10percent of GDP in both 2020 and 2021, which was worsened by pandemic spending and revenue collapse. However, spending inefficiencies, rigid wage bills, and political spending cycles long predate COVID-19. The result is rising debt, interest payments, and constrained development financing. There is the need to tame the wage bill. Public sector compensation consumes over 50percent of tax revenues. Rationalizing the wage structure and undertaking rightsizing (with retraining and redeployment) will create fiscal space for investment.

There is the need for a consideration on capping transfers and subsidies. Statutory funds and quasi-fiscal subsidies must be reviewed. For example, transfers to funds like GETFund, NHIF, and DACF should be aligned with performance and fiscal space. As part of expenditure rationalization and fiscal discipline, it is important that the country targets social spending. Rather than blanket subsidies on fertilizers for example, Ghana should use digital ID systems such as the Ghana Card and mobile transfers to deliver targeted relief to vulnerable households.

Public investment is also of paramount importance in our quest for fiscal discipline. The Auditor General’s reports have shown recurring project cost overruns, idle assets, and procurement infractions. Ghana needs to adopt public investment management frameworks that ensure value for money in capital spending. Finally, it is recommended that new borrowing should be aligned with a clear medium-term debt strategy. Strengthening parliamentary oversight and publishing contingent liabilities will improve investor confidence and reduce the cost of borrowing.

GoldBod Is not enough

While GoldBod provides a novel tool to support forex liquidity and buy time, it is no substitute for comprehensive fiscal reform. Sustainable economic stabilization requires mobilizing more domestic revenue without overburdening the poor and spending smarter through disciplined and transparent governance. Only through these structural changes can Ghana insulate itself from external shocks, reduce its dependency on foreign borrowing, and lay the foundation for resilient and inclusive growth in the Fourth Republic and beyond.

>>>the writer is an Economist | Chartered Accountant | Banker. He can be reached via www.linkedin.com/in/akwasi-agyeman-britwum and or [email protected]

Sources

• Bank of Ghana – Monetary Policy Committee Press Releases (2020–2024), Annual Reports, Balance of Payments Updates, Foreign Exchange Auction Disclosures.
• Ministry of Finance – National Budget Statements (1993–2024), Mid-Year Reviews, Debt Sustainability Analyses, Fiscal Strategy Documents.
• Ghana Statistical Service – Consumer Price Index, GDP Growth Data, Labour Force Surveys, Trade Statistics.
• International Monetary Fund (IMF) – Article IV Consultation Reports (various years), Ghana Economic Outlook, Fiscal Performance and Reforms in Ghana.
• World Bank – World Development Indicators, Ghana DataBank, Public Finance and Tax Data.
• Ghana Revenue Authority (GRA) – Tax Revenue Performance Reports, Tax Expenditure Reviews.
• Public Interest and Accountability Committee (PIAC) – Petroleum Revenue Reports (2011–2023).
• Africa Centre for Energy Policy (ACEP) – Policy Briefs on Energy, Oil Governance, and Gold Monetization in Ghana.
• Natural Resource Governance Institute (NRGI) – Ghana Resource Governance Index, Revenue Transparency Scorecards.
• Ghana Chamber of Mines – Annual Mining Industry Performance Reports.
• Auditor-General’s Department – Reports on the Public Accounts of Ghana, Extractive Sector Audit Findings.
• Business and Financial Times Archives – News features on fiscal policy, debt restructuring, Gold for Oil and GoldBod programmes.
• Official Communications – Statements from the Ministry of Lands and Natural Resources and Ghana Gold Board (GoldBod).