BoG introduces domestic gold purchasing programme to boost reserves

Bank of Ghana introduces domestic gold purchasing programme to boost reserves

June 18, 2021 2:46 PM

The Bank of Ghana will purchase 8.7 tonnes of domestically-mined gold over the next five years to bolster its foreign currency reserves, Governor Ernest Addison revealed on Thursday, June 17, 2021.

BoG launches domestic gold purchasing programme to boost reserves

Ghana, Africa's top gold producer, is weathering its steepest decline in production since 2004 after the Covid-19 pandemic disrupted global supply chains.

The central bank hopes the gold purchases will help it raise cheaper sources of financing to provide short-term foreign exchange liquidity.

"This day is indeed historic because it marks the first time the Bank of Ghana is embarking on domestic gold purchasing to augment our foreign reserves with a view to doubling our gold holdings," Mr. Addison said in a speech.

The country's foreign reserves have steadily grown over the last 15 years to just under $11-billion, but gold reserves have been unchanged over the same period, according to central bank figures.

An initial 540 kg of gold will be purchased over the next year from domestic mining firms and small-scale miners, Addison said, with the goal of acquiring 8.7 tonnes by the end of 2026.

The Bank of Ghana will pay for the gold in local currency at prevailing market prices, he said.

Chronicling the importance of gold as a monetary asset, the Governor of the Bank of Ghana, Dr Ernest Addison said during the era of the Gold Standard, currency issued by Central Banks has to be fully backed by gold, measured in troy ounces at the time.

“This gold standard measure of assessing the strength of currencies was later abandoned at the turn of the 20th Century, when economies begun printing currencies without the backing of gold. Since this transition, currencies have been backed by a variety of instruments including gold, government bills and stocks, and first-class bills of exchange. In fact, when Ghana issued its jurisdictional currency in 1958, the original currency cover assets for the currency issued included gold, sterling, and call money in the United Kingdom, and British Treasury Bills with maturities not exceeding three months, among others.”

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