$907 million worth of gold purchased under gold-for-oil policy - BoG Governor

The direction of recent macroeconomic indicators has given some positive signals of a gradual turnaround in the economy, Bank of Ghana Governor Ernest Addison has said.

He said this follows the implementation of "sound" macroeconomic policies, the "successful" completion of the domestic debt restructuring, and a wide range of structural reforms.

Speaking at the Chartered Institute of Bankers' Governor's Day, Dr Addison said: "Indications are that sustained policy efforts are needed to firm up the emerging stability and growth".

One of such policy effort is the central bank’s Domestic Gold Purchase Programme (DGPP), which was launched in June 2021.

He explained that with the DGPP, the central bank started converting a domestic asset into a foreign asset through the purchase of locally-produced gold in local currency and converting same into monetary gold.

The objective, Dr Addison mentioned, is "to rebuild reserves, stabilise the foreign exchange market, and in turn, support the disinflation process." "The first leg of DGPP is the Gold for Reserves (G4R) transactions initiated by the central bank to augment foreign reserves with a view to double gold holdings in the foreign exchange reserves within five years", he said, adding: "Since its inception, the Bank has purchased 17.89 tons of gold, equivalent to US$1.14 billion, which has more than doubled the level of the central bank’s gold reserves, well ahead of the initial target."

Apart from the reserve buildup, Dr Addison said the Gold for Oil (G4O) programme, another leg of the DGPP, has also helped to "reduce the demand for US dollars by the Bulk Oil Distribution Companies (BDCs), who would otherwise have sourced forex from the market for the importation of petroleum products".

"So far, a total of 14.23 tons (US$907 million) of gold has been purchased for barter payments for importation of petroleum product", he reported. He said the G4O programme has also "impacted the central bank’s cash flow, helped maintain stable ex-pump prices, fostered market confidence, and supported the local currency".

In addition to the improvements in the macroeconomic environment and the performance of the banking sector, Dr Addison said the central bank has also worked to strengthen the regulatory and supervisory frameworks "to improve the overall resilience of the financial system".

"Furthermore, the ongoing work of the Ghana Deposit Protection Corporation and the Financial Stability Council will help to further strengthen the resilience of the banking sector and the protection of deposits," he added.