The International Monetary Fund (IMF) Resident Representative to Ghana, Dr Adrian Alter, has urged the Bank of Ghana (BoG) to avoid engaging in quasi-fiscal activities that could weaken its balance sheet and undermine its primary mandate of maintaining price stability.
Dr Alter said the central bank’s involvement in activities outside its core monetary policy functions could expose it to significant financial losses and potentially constrain its ability to effectively manage inflation and other macroeconomic pressures.
His comments come amid an ongoing public debate over the financial implications of the Domestic Gold Purchase Programme (DGPP), particularly following revelations of an estimated US$1.7 billion loss associated with the programme in 2025.
Speaking in an interview with Bernard Koku Avle on Channel One TV, Dr Alter acknowledged the important role gold has played in Ghana’s recent economic stabilisation efforts.
According to him, increased gold export proceeds have contributed to the stabilisation of the cedi and helped the country rebuild its international reserves.
“Gold plays a central role to the economy,” he said, noting that higher gold export proceeds had supported the local currency and strengthened Ghana’s reserve position.
However, he stressed that the experience with the Domestic Gold Purchase Programme also offered important lessons regarding governance, transparency, reporting and the costs associated with the initiative.
Dr Alter said IMF analysis showed that the Domestic Gold Purchase Programme had generated significant losses for the Bank of Ghana over the course of its operations.
He explained that the losses had contributed to the deterioration of the central bank’s financial position, with the Bank ending 2025 with negative equity of roughly seven per cent.
He said the negative equity position was driven by multiple factors, including the Domestic Debt Exchange Programme (DDEP) and the Domestic Gold Purchase Programme.
“The main point here is that the central bank cannot be involved in this activity, quasi-fiscal activity, because its balance sheet is deteriorating, and that basically can interfere with its primary mandate, which is price stability,” Dr Alter explained.
He warned that continued financial pressures on the central bank could affect its ability to undertake critical monetary policy operations, particularly those associated with controlling liquidity in the economy.
According to the IMF representative, the Bank of Ghana incurs operational and sterilisation costs in the execution of monetary policy.
He cautioned that if the central bank’s balance sheet becomes excessively strained, it could face difficulties in maintaining the level of operations required to control inflation.
“The central bank has operational costs, and it has costs for sterilisation,” he said.
Dr Alter explained that if the costs associated with these operations became too burdensome, the central bank could potentially scale back its interventions, creating risks for price stability.
“If it decides that this is too expensive, then it affects their balance sheet, they might not do that, and then you will see prices skyrocketing,” he said.
He stressed that avoiding a return to such circumstances was critical for Ghana’s economic recovery.
“We want them to maintain price stability as their primary objective,” he added.
Beyond the financial losses associated with the gold programme, Dr Alter also emphasised the importance of preserving the independence of the Bank of Ghana.
He said a strong and independent central bank was essential to preventing fiscal dominance, particularly situations where the central bank is pressured to provide financing to government entities.
According to him, government financing needs should primarily be met through the financial markets rather than through direct lending by the central bank.
“The BoG should not lend to government entities. They should get that financing from the markets, from the commercial banks,” he said.
He argued that maintaining this separation would help protect the credibility of monetary policy and ensure that the central bank remains focused on its core mandate.
Dr Alter noted that the government had already taken steps to separate the gold purchasing and selling operations from the Bank of Ghana, with the activities now being handled by the Ghana Gold Board (GoldBod).
He said the transfer of the operations represented an important first step but stressed that the government and GoldBod must carefully consider how the programme would be financed going forward.
“Now, basically, the operations have been moved from the BoG to GoldBod, both buying and selling of gold,” he said.
He urged the government and GoldBod to develop a sustainable financing model that would minimise costs while maximising the economic benefits of the gold purchasing programme.
The IMF representative also pointed to measures being taken to reduce the cost of the programme.
According to him, the cost of the programme stood at about 15 per cent in 2025, but authorities are working towards reducing it to approximately five per cent.
He described the reduction as part of efforts to improve the programme’s efficiency and financial sustainability.
“They were 15% in 2025. They are on the path to reducing that to 5%,” he said.
However, Dr Alter cautioned that reducing costs alone would not be enough if the programme was expanded beyond what could be sustainably financed.
He therefore urged authorities to carefully assess whether scaling up the gold purchase programme would remain financially viable over the long term.
“They need to think whether scaling up this programme can be sustained in the long term,” he said.
Despite his concerns about the financial structure and governance of the programme, Dr Alter did not dismiss the broader importance of gold to Ghana’s economy.
He acknowledged that the country’s gold exports had played a significant role in improving foreign exchange availability, supporting the cedi and rebuilding international reserves.
His comments therefore point to the need for Ghana to balance the economic benefits of the gold sector with strong governance, transparency and prudent financial management.
The debate over the Domestic Gold Purchase Programme has intensified in recent weeks following competing claims over its financial performance.
While the Minority in Parliament has raised concerns about losses linked to the programme and called for further scrutiny, GoldBod has disputed claims that its own operations recorded a loss, pointing instead to its reported surpluses in its 2025 financial statements.
The IMF’s position, as outlined by Dr Alter, centres on ensuring that gold-related operations do not weaken the financial position and independence of the central bank.
By 1960news.com
