Is Communication of “Losses” Through GoldBod Simply Summary Drivel? Bright Simons Asks

Introduction

The debate surrounding Ghana’s GoldBod initiative has intensified, centering on allegations of significant financial losses and the sustainability of the Cedi stabilization strategy. Critics, including prominent policy analyst Bright Simons, argue that while the program has contributed to currency stability, the accounting treatment and operational mechanics may be masking deeper structural risks. This analysis addresses three critical questions: How did the losses occur, are they significant, and do the benefits of a stable currency outweigh the fiscal costs? By dissecting the mechanics of the GoldBod trading model and the Bank of Ghana’s (BoG) foreign exchange (FX) interventions, we can determine whether the current narrative is a misunderstanding of complex finance or a warning of impending economic instability.

Key Points

Background

Public advocacy regarding Ghana’s economic management often faces a tension between technical rigor and public readability. The GoldBod losses saga represents a pivotal moment in this discourse. The government established GoldBod to aggregate gold from local miners, primarily the Artisanal and Small-scale Mining (ASM) sector, to bolster the Bank of Ghana’s reserves and provide liquidity for FX market interventions.

According to IMF data, GoldBod sold approximately $5 billion to the BoG from ASM sources and an additional $2.6 billion from legacy assets (large-scale miners) outside the formal GoldBod channel. These funds were instrumental in intervening in the FX market to stabilize the Ghana Cedi. However, the operational model—buying gold locally in Cedis and selling it internationally in Dollars—created a pricing mismatch that has become the focal point of the current controversy.

Analysis

How Exactly Did GoldBod Incur Losses?

The loss calculation mechanism is straightforward but often obscured by complex accounting discussions. The core issue is the discrepancy between the LBMA (London Bullion Market Association) benchmark price and the effective price GoldBod pays to local miners after factoring in premiums and exchange rates.

To illustrate, consider the transaction data from December 10, 2025:

• Global Price (24K): ~$4,196 per troy ounce.
• Official Exchange Rate: 11.42 GHS/USD.
• Base Local Price (23K): GHS 11,446 per Ghana pound.
• GoldBod Bonus: GHS 650 per Ghana pound (introduced to incentivize miners to sell to the state rather than smugglers).

When the bonus is applied, the effective price per ounce rises to approximately $4,435. This represents a premium of 5.714% over the global market price. In essence, GoldBod is buying gold at a loss on the purchasing side.

On the selling side, GoldBod cannot simply sell at the full global price. Because they are dealing in dore (raw gold) rather than refined bars, and must account for freight, insurance, and assay verification, they must sell at a discount to international offtakers. Furthermore, these offtakers provide advance liquidity to the BoG, a service for which they demand compensation. Consequently, the “spread” is squeezed from both ends: high local purchase prices and discounted international sale prices.

Are These Losses Significant?

The significance of the losses depends on the capital buffer available to absorb them. In 2025, the Ministry of Finance allocated $279 million as an operating strategy fund for GoldBod. However, the loss run-rate on the ASM leg alone was approximately $214 million by the end of Q3.

If we annualize this loss trajectory, the figure approaches $285 million. This implies that, without the Bank of Ghana’s unlimited liquidity support (which functions as an implicit subsidy), GoldBod could become functionally insolvent within roughly a year based on the allocated buffer alone. Even a conservative “functional insolvency” trigger—defined as the exhaustion of 50% of the buffer—would occur in approximately six months.

Comparing this to Cocobod (Ghana Cocoa Board), another state policy institution, highlights the severity. Analysis of SIGA and Auditor General reports shows that Cocobod’s losses, relative to turnover, are significantly lower than the near-5% loss margin currently observed with GoldBod. A consistent loss of this magnitude places severe stress on the sponsoring government and raises questions about the sustainability of the policy intervention model.

The Benefit Analysis: Do the Gains Outweigh the Costs?

Proponents argue that the Cedi stability justifies the losses. However, attributing currency appreciation to a single factor is economically unsound. The Cedi’s performance is influenced by fiscal deficits, inflation, export efficiency, and monetary policy.

The Mechanism of Influence: The primary channel through which GoldBod affects the exchange rate is by diverting “gold dollars” from commercial banks and parallel markets to the central bank. The BoG then uses these dollars for FX market interventions. However, only about 50% of the intervention funds come from GoldBod; the rest comes from other exporters, large-scale mines, and IMF flows.

Isolating the Impact: The Cedi appreciated from 14.7 to 11.14 (approx. 25%) against the dollar in 2025. A significant driver was the global surge in gold prices (up ~72%). Historical correlation suggests that a 10% rise in gold prices leads to roughly 3.9% appreciation in the Cedi through the export channel. Therefore, the gold price rally alone accounts for an estimated 8.4% of the Cedi’s appreciation.

After accounting for other factors like IMF fiscal consolidation, debt restructuring, and interest rate adjustments, GoldBod’s contribution to the remaining appreciation is capped logically at roughly 3 percentage points. This translates to an import burden relief of about $600 million.

The Hidden Ledger: Sterilization and Risk

The cost-benefit analysis must include the cost of sterilization. When the BoG buys gold in Cedis, it creates new liquidity. To prevent inflation, it must “mop up” this money via Open Market Operations (OMO), effectively borrowing from banks at interest.

On a $5 billion gold acquisition base, the annual interest expense on this sterilization is estimated at GHS 11–13 billion. If the BoG incurs losses on this activity, it impacts the central bank’s balance sheet. When we combine the GoldBod trading losses ($214M+) with the sterilization costs, the total program cost approaches the $600 million benefit derived from import relief. In this scenario, the net economic benefit approaches zero.

Pro-cyclical Risk: The most critical vulnerability is the dependency on high gold prices. If gold prices drop to historical means (~$2000), the value of reserves would plummet. Because the BoG has committed to long-term supply contracts and liquidity advances, it would be forced to print more Cedis to cover the shortfall, potentially triggering a currency crisis just as severe as the stabilization was meant to prevent.

Practical Advice

For policymakers, investors, and citizens monitoring the Ghana economy, the following steps are recommended:

• Monitor the Gold-Cedi Correlation: Do not attribute Cedi strength solely to government intervention. Watch global gold trends and IMF fiscal targets as primary indicators of currency health.
• Assess BoG’s Balance Sheet: Pay close attention to the Bank of Ghana’s profit and loss statements. High sterilization costs and “quasi-fiscal” activities often precede central bank losses.
• Demand Transparency: The “opaque” nature of the GoldBod operations, as highlighted by critics, increases risk. Investors should seek clear, audited reports on the spread between local purchase prices and international sale prices.
• Prepare for Volatility: The economy is now heavily exposed to gold price fluctuations. Businesses should hedge against the risk of a sudden reversal in the exchange rate should the gold price retreat.

FAQ

Conclusion

The assertion that communication regarding GoldBod losses is “summary drivel” is perhaps an overstatement, but it captures the frustration with a narrative that downplays structural risks. While the GoldBod initiative has provided a temporary bridge to currency stability, it is not a miracle cure. The mechanics reveal a system that buys gold at a premium, sells at a discount, and pays high interest to sterilize the resulting liquidity. At best, the program is cost-neutral; at worst, it exposes the Ghanaian economy to severe pro-cyclical risks dependent on sustained high gold prices. Sustainable economic management requires moving beyond these opaque interventions toward genuine fiscal discipline and transparency.