BoG Governor Proposes Funding Overhaul to Sustain Ghana’s Gold for Reserves Programme

Introduction

The Governor of the Bank of Ghana (BoG), Dr. Johnson Asiama, has initiated a crucial dialogue regarding the financial sustainability of the Ghana Gold Board (GoldBod). Speaking during a Public Accounts Committee hearing, Dr. Asiama called for a comprehensive review of GoldBod’s current trading model. The central proposal involves the Ministry of Finance stepping in with budgetary allocations to support the operations, thereby shielding the central bank from absorbing losses. This move is aimed at securing the long-term viability of the “Gold for Reserves” programme, a strategic initiative that has significantly bolstered Ghana’s foreign exchange buffers.

As the debate intensifies over who should bear the financial burden of the state’s gold buying activities, the Governor emphasizes that the goal is not to dismantle the system but to enhance its efficiency. By eliminating inefficiencies and establishing a sustainable funding structure, the administration hopes to maintain the momentum of the reserve accumulation strategy without compromising the financial health of the central bank.

Key Points

Background

To understand the current controversy, it is essential to look at the establishment of the Ghana Gold Board (GoldBod) and its role in the national economy. GoldBod was created to regulate and commercialize the gold sector, particularly focusing on the purchase of gold from small-scale miners. The overarching strategy is the “Gold for Reserves” programme, where the state purchases gold locally and uses it to build up the nation’s foreign exchange reserves, thereby stabilizing the local currency, the Cedi.

The Gold for Reserves Programme

The “Gold for Reserves” initiative is a monetary policy tool designed to diversify Ghana’s reserve assets. By converting local gold purchases into foreign reserves, the Bank of Ghana aims to reduce reliance on external borrowing and improve the country’s balance of payments position. According to Dr. Asiama, the evidence of this success is clear, pointing to tangible increases in reserves attributable to the programme.

The Financial Burden on the BoG

Initially, the Bank of Ghana acted as the financier for GoldBod’s operations. This arrangement involved the central bank providing the liquidity needed to buy gold from miners, with the expectation that profits from subsequent sales would cover costs. However, operational realities proved more complex. The central bank found itself absorbing significant financial losses generated by the trading activities. This situation became a focal point of scrutiny following the release of the International Monetary Fund’s fifth review of Ghana’s economic programme.

Analysis

The Governor’s proposal to shift the financial responsibility from the central bank to the Ministry of Finance represents a significant policy pivot. It touches on the delicate balance between monetary policy autonomy and fiscal support.

The Governor’s Stance: Efficiency over Elimination

Dr. Asiama has been clear that his objective is not to shut down GoldBod. He stated, “It’s not a question of shutting it down, but enhancing its efficiency looking at the inefficiencies and taking them out.” This statement suggests that the Governor views the core business of GoldBod as valuable, but the execution and funding mechanism require recalibration. By asking, “Should the Ministry of Finance make a budgetary allocation to take care of the costs, given that this is supporting our reserves build-up?”, he frames the GoldBod operations as a national development project rather than a purely commercial central bank activity. This distinction is vital; if the program builds national reserves, the argument follows that the national budget (managed by the Ministry of Finance) should subsidize its operational costs.

The IMF Revelation and the $214 Million Figure

The urgency of the Governor’s request was underscored by the IMF’s fifth review findings. The IMF reported that losses from artisanal and small-scale gold transactions under the programme had reached $214 million by the end of September 2025. This figure highlights the scale of the financial exposure the Bank of Ghana has faced. The central bank, traditionally the guardian of fiscal prudence, has had to carry a heavy load that arguably falls outside its core mandate.

The Parliamentary Counter-Narrative

However, the narrative is not uncontested. The Majority Caucus in Parliament has pushed back against the IMF’s assessment and the Governor’s concern over “losses.” They argue that the $214 million figure is a mischaracterization of the financial events. According to the Caucus, this amount represents a “transactional and insurance price” incurred by GoldBod. This distinction is legally and financially significant. If the funds were used for insurance and transaction costs to facilitate legitimate trade, it could be viewed as an investment or a necessary cost of doing business, rather than a net loss. This disagreement sets the stage for a complex negotiation between the central bank, the executive branch, and the legislative body regarding the true financial health of the program.

Practical Advice

For stakeholders, investors, and citizens following this development, understanding the implications of a funding model shift is crucial. Here are key considerations regarding the proposed changes to GoldBod’s financing.

For Policymakers

Policymakers must evaluate the legal framework governing the Bank of Ghana’s ability to finance quasi-fiscal activities. Establishing a clear “budgetary allocation” mechanism requires legislative backing to ensure that the Ministry of Finance can legally transfer funds to support the GoldBod. Furthermore, they must define the metrics for success: is the program measured solely by reserve accumulation, or must it also be commercially profitable?

For the Gold Sector

Artisanal and small-scale miners rely on GoldBod for market access. Any instability in the funding model could disrupt cash flows to these miners. A sustainable financing solution, such as the one proposed by Dr. Asiama, would provide certainty to the sector. If the Ministry of Finance assumes the role of financier, it could lead to more standardized payment schedules and potentially better pricing mechanisms for miners.

Managing Inefficiencies

The Governor’s mention of “taking out inefficiencies” suggests that operational audits are necessary. Practical advice for GoldBod management includes implementing robust tracking systems for gold purchases and sales to minimize leakage and ensure that transaction costs are truly minimized. Transparency in how the $214 million was spent—differentiating between operational loss and transactional costs—is essential to bridge the gap between the BoG and the Majority Caucus.

FAQ

Conclusion

Governor Johnson Asiama’s call for a review of GoldBod’s trading model and a shift to Ministry of Finance budgetary support highlights a critical juncture in Ghana’s economic management. While the “Gold for Reserves” programme has proven its value in strengthening the nation’s financial buffers, the current funding arrangement has placed an unsustainable burden on the central bank. The path forward requires a unified development approach that reconciles the differing views on the $214 million expenditure. By establishing a sustainable financing structure, Ghana can preserve the gains of its gold accumulation strategy while ensuring the financial integrity of its central bank.