Ghana's economy highly sensitive to gold prices - IMF

A newly released International Monetary Fund (IMF) report says Ghana’s economic stability is highly sensitive to fluctuations in global gold prices.

The analysis underscores that the country’s macroeconomic outlook is particularly vulnerable to changes in gold prices and the resulting exchange rate movements, given that gold is Ghana’s largest export and main source of foreign exchange.

The IMF’s detailed Risk Assessment Matrix revealed a landscape where external shocks and domestic vulnerabilities intersect.

A specific adverse scenario analysis suggests that a potential drop in gold prices of about 30 percent by end-2026, bringing prices down to around US$2,820 per ounce, would significantly reduce gold exports, weaken foreign exchange inflows, and put pressure on the cedi and reserve adequacy.

IMF staff estimated that foreign exchange reserve coverage in 2026 could decline by 1.1 months of imports compared to the baseline scenario.

This decline would also weaken the Bank of Ghana’s balance sheet due to the large share of its foreign exchange reserves held in gold assets.

The Fund warned that intensifying geopolitical tensions, escalating global trade measures, and heightened commodity price volatility could trigger sharp price swings, reignite inflation, and severely hamper growth by eroding investor confidence.

It also noted that financial market volatility in major economies poses a high risk, potentially worsening the domestic impact of Ghana’s recent debt restructuring on the banking sector and impairing banks’ ability to lend.

The IMF further flagged critical domestic risks.

It noted that delays in concluding debt restructuring negotiations are a high-impact risk that could further deplete reserves, trigger sharp cedi depreciation, and fuel inflation.

The Fund added that domestic fiscal slippages from the agreed path under the US$3 billion Extended Credit Facility (ECF) programme carry a high likelihood and could widen budget deficits, undermine debt sustainability, and place severe pressure on the exchange rate.

The Bretton Woods institution also warned that rising social discontent, driven by the high cost of living, presents a medium-term threat that could slow the pace of critical reforms.

To navigate these multifaceted risks, the IMF outlined a comprehensive policy response.

It urged the Bank of Ghana to strengthen foreign exchange reserve buffers and allow greater exchange rate flexibility, while ensuring orderly market conditions.

The IMF also advised the central bank to hedge its reserve assets against market risks, including exposure to fluctuations in gold prices.

In addition, it recommended that Ghana deepen structural reforms to boost domestic production, diversify the economy, and improve the business environment in order to reduce import dependency.