Gold For Oil

The Governor of the Bank of Ghana, Dr Ernest Addison, has announced that the central bank plans to transfer the Gold for Oil programme to a commercial bank for operation. This move is aimed at enabling the BoG to focus on its primary responsibilities. Asked by Buem lawmaker Kofi Adams whether this programme is an initiative he will recommend to be pursued considering his earlier position that the programme will be gradually phased out, he answered while speaking before the Public Accounts Committee of Parliament on Monday, April 8, he said “It is a programme that we recommend to continue because it helped us in the period of crisis.

We only want to make sure that this is done by a commercial bank so that we can have time to focus on our operations as a central bank. “So this is the discussion that we are holding going forward but the ability to be able to exchange our natural resource directly for oil when oil prices get out of hand, we think that it is a very innovative porgramme.

“So it is really about the central bank spreading itself too thin by trying to add gold for oil also into our business but we are fully focused on buying gold to build our reserves.” Regarding the Gold For Reserves programme, he further assured the PAC that by next year the central bank will see a huge jump in its holdings of gold due to this particular programme.

Dr Addison said that the full benefits of the programme had not been seen yet because it was started in 2022. In July 2021, the BoG commenced a Gold Repurchase Programme to double its gold holdings in five years.

During the launch of the programme Governor Addison stated that the Bank of Ghana‘s foreign reserves had grown steadily over the last fifteen years to current levels of almost US$11.00 billion, but the portion of gold reserves has remained unchanged at 8.77 tonnes, with the average value of gold reserves held as a percentage of Gross International Reserves (GIR) at 6.14 percent.

He added that a cross-country comparison showed that contrary to Ghana’s static gold holdings in its reserves, the USA and other industrialized countries in the Eurozone had continued to hold large gold reserves, post the gold standard era.

“According to the International Monetary Fund (IMF) and the World Gold Council, major industrialized countries held the largest volume of gold reserves as at April 2021, followed by major emerging markets with major developing countries lagging behind the curve. “Globally, Central Banks demand for Gold, over the past decade, ranks third behind Jewellery, Technology and Investment sectors. These trends are revealing because Ghana has mined gold for over three centuries and for the most part, the gold is exported. In 2019 for instance, Ghana was adjudged the largest producer of gold in Africa and
the 7th largest in the world. Yet, in that same year, other central banks acquired a record level of 670 tonnes of gold to boost their reserves according to the World Gold Council.

“The statistics show that the pandemic period saw a marginal decline in central banks’ gold demand but, the number of central bank buyers outweighed the number of sellers over the period. Most of the buyers were from emerging market countries which had lower ratios of gold-to-total reserves. For instance, Turkey was the largest annual gold net purchaser, adding 134.5 tonnes to its official gold reserves in 2020 alone. Other large net purchasers of gold during the pandemic year were, India, Russia, United Arab Emirates, Qatar, Colombia and Cambodia, among others. Ghana added nothing to its gold reserves over the period,” he said.

Asked whether the movement in foreign reserves assets have in any way been impacted by the God for Reserves programme, Dr Addison said “The Gold for Reserves programme started in 2022 so you won’t see the full effect of the benefits in 2022.

“As you can see we got only 50 million more in terms of our gold holdings. But I can assure you that next year when we come before you you will see a big jump in our holdings of gold because of that particular programme.”

The PAC was looking into the Autrod General’s Report of 2023.

The report had captured that the Bank of Ghana’s foreign exchange reserve assets as at 30 June 2022 were US$7,634.08 million compared with US$11,023.97 million recorded on 30th June 2021, a decrease of US$3,389.89 million or 30.75%. It further recommended that the Bank of Ghana should “continue to strengthen it’s internal control systems and supervisory roles on officials who prepare and review the statement to maintain the quality of the report, as this would credibly inform stakeholders’ decision making.”

By: Laud Nartey

Benjamin Mensah

By Benjamin Mensah

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