The Bank of Ghana’s plan to inject $1.15 billion into the foreign exchange market this month has won backing from policy analyst Steve Manteaw, who argues the move makes economic sense as long as the country exceeds its reserve targets.
The central bank announced this week it’ll begin selling dollars generated through its Domestic Gold Purchase Programme via twice weekly auctions open to all licensed banks. The sales, conducted on a spot basis with no special conditions or earmarked allocations, aim to improve market transparency and strengthen the cedi.
Governor Johnson Asiama stressed during a meeting with commercial bank heads in Accra that the process will ensure fair and transparent access for all market participants. The competitive auction format is designed to let market forces determine pricing while injecting much needed liquidity into Ghana’s forex market.
Manteaw, Co-Chair of the Ghana Extractive Industries Transparency Initiative, dismissed concerns that selling gold derived dollars could deplete reserves. Drawing an analogy to Saudi Arabia’s petro-dollar strategy, he noted that countries use their natural resource revenues to support their currencies, calling it “a balancing art.”
His social media comment addressed critics who’ve raised alarms about the plan, arguing that as long as Ghana maintains reserves above required levels, converting gold proceeds into forex market interventions is sound policy. The approach allows Ghana to leverage its mineral wealth for currency stability without compromising reserve adequacy.
The strategy comes after aggressive forex interventions earlier this year that dramatically strengthened the cedi. In the first quarter of 2025, the Bank of Ghana sold $1.4 billion into the market, helping the currency appreciate from GH¢16 to GH¢10.40 against the dollar, according to International Monetary Fund data.
That intervention contributed to declining inflation and created expectations of monetary policy easing. But it also raised questions about sustainability and whether the central bank was depleting reserves to achieve short term currency gains ahead of political transitions.
The Domestic Gold Purchase Programme, launched to formalize Ghana’s gold trade and capture more revenue from the sector, has generated significant dollar inflows. By purchasing gold directly from small scale miners and licensed dealers, the BoG acquires bullion it can sell internationally for foreign exchange.
Ghana’s gold exports remain one of the country’s primary forex earners, though illegal mining and smuggling have long undermined potential revenues. The formalized purchase program aims to bring more of that trade under regulatory oversight while channeling proceeds into reserve management.
The $1.15 billion planned for October sales represents substantial intervention firepower. Whether it’s sufficient to stabilize the cedi depends on underlying demand dynamics, import pressures, and broader economic conditions that affect forex supply and demand.
Some economists have questioned whether forex interventions address fundamental imbalances or merely provide temporary relief. Ghana’s persistent current account deficits, driven by import dependence and limited export diversification, create structural demand for dollars that episodic interventions can’t permanently resolve.
The competitive auction format is intended to improve on previous forex distribution mechanisms that critics argued favored certain banks or created opportunities for rent seeking. By letting all licensed banks bid based on price, the BoG hopes to enhance market efficiency and transparency.
However, questions remain about how much of the injected forex actually reaches end users like importers and manufacturers versus being absorbed by speculative positioning. The effectiveness of interventions depends partly on transmission mechanisms that ensure liquidity flows to productive economic activities.
Ghana’s gross international reserves stood at approximately $6.5 billion as of mid 2025, providing import cover of about 3.2 months. That’s above the IMF’s recommended minimum of three months, giving the central bank room to intervene without immediately jeopardizing reserve adequacy.
But reserves remain tight by historical standards, and the government’s external debt obligations create ongoing pressure on dollar availability. Balancing intervention needs against reserve preservation requires careful calibration, particularly given Ghana’s recent debt restructuring and ongoing IMF program.
The gold to forex strategy reflects broader efforts to monetize natural resources for macroeconomic stability. Similar approaches have been employed by commodity exporting countries worldwide, with varying degrees of success depending on governance quality and economic management.
Manteaw’s endorsement carries weight given his role monitoring extractive industries governance. His reference to Saudi petro-dollars acknowledges that resource rich countries have long used commodity revenues to manage their currencies, though outcomes depend heavily on policy frameworks and institutional capacity.
The twice weekly auction schedule suggests the BoG plans sustained rather than one off intervention. Spreading the $1.15 billion across multiple sales could provide steadier market influence than lump sum injections that create temporary spikes followed by renewed pressure.
Market participants will watch closely to see whether the interventions achieve sustained cedi stability or merely postpone depreciation pressures that resurface once injections end. The answer will partly depend on whether Ghana addresses underlying fiscal and structural challenges that create persistent forex demand.
For now, the BoG appears committed to using its gold purchase proceeds to support currency stability, a strategy that Manteaw and other analysts view as legitimate use of natural resource revenues provided it doesn’t compromise reserve safety.
