The Institute of Economic Research and Public Policy (IERPP) has cautioned the Bank of Ghana (BoG) and fiscal managers against over-reliance on record-high global gold prices to maintain macroeconomic stability.
Speaking on behalf of the Policy Think Tank, Senior Research Fellow Dr. Frank Bannor warned that celebrating current reserve figures without addressing Ghana’s underlying structural weaknesses creates a dangerous illusion of economic recovery.
The Policy Think Tank acknowledged that the central bank’s gold acquisition strategy and aggressive market interventions have offered temporary relief to the Cedi.
However, recent indications of pressure on foreign exchange reserves, even with gold trading near historical highs of $4,280 per ounce, highlight the economy’s extreme vulnerability.
“We are witnessing an economy running on borrowed time and inflated commodity cycles. The heavy lifting currently keeping our foreign exchange reserves intact is being done almost entirely by extraordinary global gold prices. If gold were to pull back to $1,800 levels, the Cedi would instantly require emergency support,” he said.
He added, “Interventions that artificially support the currency without an expansion in domestic production and non-traditional exports are unsustainable. When the global commodity tide recedes, the real productivity of the economy is all that remains.”
Core Findings & Policy Recommendations:
The Institute outlined four critical observations for national policy direction:
Unrealized Structural Reform:
Current exchange rate stability is predominantly exogenous, driven by favorable terms of trade in gold rather than domestic industrial growth or import substitution.
Commodity Price Dependency:
Relying on primary commodities exposes Ghana to severe external shocks once the global commodity super-cycle corrects.
Re-evaluating FX Interventions:
Reserve management should focus on long-term buffer accumulation rather than short-term market smoothing that dampens price signals.
Aggressive Export Diversification:
Policy efforts must urgently shift toward building competitive value-added manufacturing to generate resilient, multi-sector foreign exchange inflows.
The IERPP urges policymakers to use the current windfall to implement deep structural adjustments before global market conditions shift.
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