Ghana’s economic landscape is undergoing a significant transformation under the leadership of its newly appointed central bank governor, Dr. Johnson Asiama. A key element of this shift is the suspension of the Gold-for-Oil program, a flagship initiative of the previous administration designed to alleviate pressure on foreign exchange reserves by bartering gold for petroleum products. This decision marks a departure from the established strategy and signals a renewed focus on traditional monetary and fiscal policies to stabilize the cedi, Ghana’s national currency, and navigate the complexities of the country’s economic recovery program supported by the International Monetary Fund (IMF).
The Gold-for-Oil program, while conceptually appealing, encountered challenges in its implementation, resulting in financial losses that ultimately prompted its suspension. The program’s objective was to mitigate the impact of volatile global oil prices and reduce the demand for US dollars in fuel imports, thereby protecting the cedi from depreciation. However, the practical execution of the barter system proved less effective than anticipated, leading to a reassessment of its viability under the new leadership at the Bank of Ghana (BoG). Governor Asiama’s decision to halt the program reflects a commitment to fiscal prudence and a desire to strengthen the central bank’s financial position, which was significantly weakened by the economic downturn that necessitated the IMF bailout.
The suspension of the Gold-for-Oil program is part of a broader strategy aimed at stabilizing the cedi and restoring confidence in Ghana’s economy. The cedi experienced a significant depreciation of 19% against the US dollar in 2024, highlighting the urgency of addressing the underlying economic vulnerabilities. Governor Asiama has emphasized the importance of coordinated monetary and fiscal policies to achieve exchange rate stability. This includes maintaining a tight monetary policy stance, evidenced by the current interest rate of 27%, coupled with fiscal discipline under President John Mahama’s administration. The BoG is also closely monitoring inflation, which eased to 23.5% in January 2025, aiming to further curb price pressures and create a more stable economic environment.
The BoG’s commitment to financial stability extends to its internal operations. The central bank recorded a substantial deficit of GHS 60.9 billion ($3.9 billion) in 2022, primarily due to loan write-downs associated with the IMF bailout program. Governor Asiama has pledged to address these operational losses and ensure the BoG’s financial soundness. This commitment is crucial for restoring confidence in the central bank’s ability to effectively manage the country’s monetary policy and contribute to overall economic stability. Measures are being taken to control operational costs and prevent further losses, signaling a new era of fiscal responsibility within the BoG.
The long-term implications of the Gold-for-Oil program’s suspension remain a subject of discussion. Ghana’s oil import bill, which reached $4.5 billion in 2024, underscores the nation’s dependence on imported petroleum products and the associated vulnerability to global price fluctuations. The central bank’s previous practice of purchasing gold for reserves and barter deals, totaling 65.4 tons in 2024, is also under review. The potential establishment of a dedicated Gold Board to oversee bullion transactions suggests a shift towards a more formalized and transparent approach to managing gold resources. This new structure could potentially enhance efficiency and accountability in gold-related activities.
The decision to halt the Gold-for-Oil program presents both challenges and opportunities for Ghana. While the program aimed to address immediate concerns related to forex reserves and fuel security, its suspension necessitates the development of alternative strategies. The government will need to explore new approaches to manage its foreign exchange reserves effectively and ensure a stable supply of affordable petroleum products without placing undue pressure on the cedi. This may involve diversifying fuel import sources, exploring hedging mechanisms, and strengthening partnerships with international organizations. Ultimately, the success of these new strategies will be crucial for Ghana’s continued economic recovery and long-term stability.
