Bawumia Credits Gold Purchase Programme for Cedi’s Appreciation, Says Policy Averted Major Economic Crisis
According to the Former Vice President, Ghana’s Gold-for-Oil and Domestic Gold Purchase programmes helped avert a severe foreign exchange crisis.
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Former Vice President Dr Mahamudu Bawumia has attributed the recent strengthening of the Ghanaian cedi partly to the Domestic Gold Purchase Programme initiated under the previous New Patriotic Party (NPP) administration.
Speaking during an engagement with the Ghana National Association of Small-Scale Miners, Dr Bawumia said the initiative was conceived as an unconventional response to Ghana’s foreign exchange difficulties during the economic crisis triggered by the COVID-19 pandemic, the Russia-Ukraine war and Ghana’s loss of access to international capital markets.
Dr Bawumia, who was Vice President between 2017 and 2025, said Ghana had previously relied considerably on international capital markets, sometimes raising billions of dollars to support the economy.
“When I was Vice President, Ghana faced a major economic crisis,” he said.
According to him, the closure of international capital markets to Ghana and several other emerging economies created a balance-of-payments problem and severely constrained the supply of foreign currency.
“Before then, we would normally go to the capital markets, raise $3 billion and then move on in terms of our economic management. But suddenly that path was shut for Ghana and quite a few countries,” he explained.
IMF restriction intensified forex challenge
Dr Bawumia said the situation became particularly difficult during Ghana’s engagement with the International Monetary Fund (IMF), claiming that restrictions under the programme limited how much foreign exchange the Bank of Ghana could deploy to support the cedi.
He said the central bank was permitted to intervene with a maximum of about $80 million per month at the time, despite significantly higher demand for foreign exchange within the economy.
According to the former Vice President, the imbalance inevitably placed pressure on the local currency.
“When demand exceeds supply, prices would go up,” he said.
“We were really constricted in terms of availability of foreign exchange, and at the same time, the cedi was depreciating almost on a daily basis.”
Dr Bawumia said he became increasingly concerned about the possibility of Ghana experiencing severe shortages, drawing comparisons with the economic crisis that engulfed Sri Lanka, where foreign exchange shortages contributed to difficulties importing essential commodities, including fuel.
‘Gold-for-Oil essentially saved us’
Against that background, Dr Bawumia said he proposed using Ghana’s gold resources to reduce the country's dependence on US dollars for petroleum imports.
That thinking, he said, eventually produced the Gold-for-Oil programme.
“Why don't we come up with the idea of Gold-for-Oil to start with, to exchange our gold for oil so that we get out of this foreign exchange construct?” he recalled.
According to him, the intervention helped Ghana avoid potentially serious fuel supply disruptions.
“This is the background of the Gold-for-Oil programme, which essentially saved us from a major crisis,” Dr Bawumia said.
The programme involved the use of domestically purchased gold as part of arrangements to secure petroleum products, with the government arguing at the time that the policy would reduce pressure on Ghana’s foreign exchange market.
‘Why should Africa’s biggest gold producer hold just 8.7 tonnes?’
Dr Bawumia said the experience subsequently prompted a broader examination of Ghana’s gold reserves.
Despite being one of the world's major gold producers and the largest producer in Africa, he said Ghana's central bank held only about 8.7 tonnes of gold around 2021.
He contrasted Ghana's holdings with significantly larger reserves maintained by countries including the United States, Germany, Italy, France, Russia, China, Switzerland and India.
“You come to Ghana and we had 8.7 tonnes. Since independence to 2021, 65 years, we only had 8.7 tonnes as the largest gold producer in Africa,” he said.
“I said, this cannot be right.”
The former Vice President said this discrepancy led him to propose a programme under which the Bank of Ghana could purchase locally produced gold using cedis rather than first acquiring dollars.
His argument was that because Ghana produces gold domestically, the central bank could purchase the commodity in local currency and subsequently add the acquired gold to the country's reserve assets.
“We can go out there and buy our gold in cedis,” he said. “Immediately we buy the gold in cedis, it becomes foreign exchange reserves.”
Dr Bawumia said this thinking became the foundation for what eventually developed into the Domestic Gold Purchase Programme, describing the initiative as “out-of-the-box thinking” rather than a conventional economic policy.
He said the Bank of Ghana subjected the proposal to extensive due diligence before adopting it.
According to him, the central bank spent close to a year assessing whether the proposal was workable because purchasing gold with domestic currency represented an unconventional approach.
“They took their time and looked at it and finally said, yes, this is doable,” he said.
“This is really how the Domestic Gold Purchase Programme started.”
Dr Bawumia said the principal objectives were straightforward: build Ghana's reserves and help stabilise the cedi.
He claimed that by the end of 2024, Ghana had purchased approximately $5 billion worth of gold under the programme within about two years, significantly strengthening the country's reserve position.
Bawumia links reserves to cedi appreciation
The former Vice President further argued that the reserve accumulation eventually gave the Bank of Ghana greater capacity to intervene in the foreign exchange market.
According to him, restrictions on the central bank's foreign exchange interventions were subsequently removed, allowing significantly larger amounts of foreign currency to be supplied to the market.
He argued that the resulting increase in dollar supply was a major factor behind the cedi's appreciation.
“What does economics say? When you have an increase in supply, what will happen to price? It will come down,” Dr Bawumia said.
“This is how come we have had an appreciation, a significant appreciation in the currency.”
He maintained that the development could be explained principally through demand and supply.
“There's no rocket science to it. It is just simple demand and supply,” he said, arguing that the framework created under the previous administration enabled Ghana to accumulate reserves that could subsequently be deployed to support the currency.
Bawumia meets small-scale miners
Dr Bawumia made the remarks during an engagement with the Ghana National Association of Small-Scale Miners as part of consultations involving members of the NPP’s Identifiable Groups Committee on the Extractive Sector.
The discussions also focused on challenges confronting Ghana's small-scale mining industry and possible reforms aimed at promoting responsible mining.
According to Dr Bawumia, the engagement explored measures to protect the environment, create employment and increase local value addition within the extractive industry.
The former Vice President said continued engagement between policymakers and industry stakeholders would be necessary to build a sustainable and productive extractive sector.