Ghana can break away from its recurring dependence on International Monetary Fund (IMF) programmes if it combines a gold-backed monetary framework with strict fiscal discipline, Member of Parliament for the Tano North and former Economic Adviser to Dr Mahamudu Bawumia, Dr Gideon Boako, has argued.
According to Dr Boako, Ghana’s experience with gold-based monetary interventions under the previous administration demonstrates that gold can serve as a credible strategic reserve asset and provide a buffer for the cedi during periods of severe foreign-exchange pressure.
In the latest edition of his Boako Economic Digest, titled “The Bretton Woods is Fraying: Ghana Built a Bridge — The Bawumia Doctrine of Gold-Backed Stability,” Dr Boako said the global financial architecture was undergoing significant changes, creating an opportunity for emerging economies to rethink how their currencies and reserves are supported.
He argued that sanctions, sovereign asset freezes, debt distress among commodity-exporting countries and persistent inflation had exposed vulnerabilities in the traditional fiat-based international monetary system.
“The Bretton Woods (International Monetary Fund and World Bank Group) order is fraying,” Dr Boako stated, arguing that central banks are increasingly asking what could credibly back their currencies in a fragmented global economy.
Dr Boako attributed Ghana’s emerging gold-backed monetary strategy to former Vice President and economist Dr Mahamudu Bawumia, describing him as the architect of a framework that seeks to use gold as a strategic reserve and liquidity instrument without returning to the rigid gold standard of the past.
He said Dr Bawumia’s experience as a former Deputy Governor of the Bank of Ghana and his role in Ghana’s digital transformation provided the foundation for what he described as a new approach to monetary stability.
According to Dr Boako, Ghana faced a potentially severe economic crisis when foreign-exchange shortages intensified and the IMF programme placed restrictions on direct dollar intervention.
He said the country instead scaled up two major initiatives — the Domestic Gold Purchase Programme (DGPP) and the Gold-for-Oil programme.
Dr Boako said these interventions contributed to a substantial increase in Ghana’s gold reserves.
“Gold reserves rose from 8 tons to over 31 tons,” he stated.
He further claimed that Ghana’s gross international reserves exceeded $9 billion for the first time, arguing that the accumulation provided an important buffer for the economy and strengthened the cedi at a time when access to US dollars was constrained.
He acknowledged that the IMF had recognised both the gains in reserves and the balance-sheet costs associated with the gold-related interventions.
For Dr Boako, the experience demonstrates that gold can play a practical role in modern monetary policy rather than being treated merely as a historical monetary relic.
“Gold is not a relic. It is infrastructure,” he argued.
Dr Boako stressed that the model he attributes to Dr Bawumia should not be confused with the classical gold standard, under which currencies are rigidly linked to a fixed quantity of gold.
Instead, he described the proposed framework as a hybrid model based on flexibility, digital transparency and development-oriented monetary policy.
The first principle, he said, is “flexibility over fixity.”
Under this approach, gold would serve as a backing instrument and liquidity buffer while countries maintain floating exchange rates and independent monetary policies.
He proposed that a portion of reserves — between 5% and 15% — could be held in gold while the precious metal could also be used strategically in commodity settlement.
The objective, he explained, would be to strengthen monetary credibility without imposing the constraints associated with a conventional gold standard.
The second pillar is digitalisation.
Dr Boako argued that any modern gold-backed framework must be supported by strong systems for auditing, verification and transparency.
He said gold reserves should not simply be accumulated and stored in vaults, but should be subject to independent verification and supported by digital systems that allow transactions and ownership records to be transparently monitored.
“Trust is engineered through code and independent verification, not just vaults,” he said.
He suggested that such a system could be integrated with emerging digital financial technologies and central bank digital currency initiatives.
The third principle, according to Dr Boako, is a development-first design.
He argued that gold-producing countries across Africa, Latin America and Asia could use their natural resources more strategically to strengthen their currencies and reduce their reliance on external borrowing.
By directing domestically produced gold into national reserves, he said countries could retain more value within their economies while reducing their exposure to external financial shocks.
He also argued that such a framework could help commodity-producing economies guard against the destabilising effects sometimes associated with large foreign-exchange inflows from natural resources.
Dr Boako identified three developments in the global economy that, in his view, make the gold-backed approach increasingly relevant.
The first is what he described as the “de-risking” of reserves.
He argued that the freezing or restriction of sovereign assets in international jurisdictions had raised questions about the safety of relying excessively on foreign reserve currencies and externally held assets.
Gold held domestically, he said, could provide an additional layer of protection.
The second is the need for more stable mechanisms for international commodity trade.
Dr Boako pointed to Ghana’s Gold-for-Oil initiative as an example of how commodities could potentially be exchanged through alternative settlement arrangements, reducing exposure to sharp movements in foreign-exchange rates.
The third is the emergence of new forms of digital money.
As central banks around the world explore digital currencies and other monetary innovations, he argued that a carefully calibrated gold reserve could provide an additional layer of credibility, particularly for emerging economies.
Dr Boako also presented Ghana’s experience as part of a broader opportunity for African countries.
He argued that monetary innovation had historically tended to flow from advanced economies to developing countries, but said Ghana’s experience could help reverse that trend.
“For too long, monetary innovation has been exported to Africa, not from it,” he said.
He maintained that the value of Ghana’s experience should ultimately be measured by whether it can strengthen reserves, reduce currency volatility and improve economic resilience.
According to him, the global monetary system may be entering a new phase, and gold could form part of the architecture of that emerging order.
“The Bretton Woods order may be fraying, but the next order is being drafted,” he said.
Despite his strong advocacy for a gold-backed monetary framework, Dr Boako acknowledged that monetary policy alone cannot permanently prevent Ghana from returning to the IMF.
He argued that the country’s recurring economic crises have both monetary and fiscal dimensions.
His central argument is that gold-backed reserves could address the monetary vulnerabilities that contribute to balance-of-payments crises, but fiscal indiscipline could still undermine the economy.
“If this Bawumia Doctrine of Gold-backed stability is followed stricto sensu, it removes the monetary reason for IMF bailout,” he said.
“What remains is only the fiscal reason — overspending.”
Dr Boako therefore called for the gold-backed approach to be accompanied by strict fiscal controls, including what he described as “zero tolerance” for unbudgeted expenditure and adherence to Ghana’s Fiscal Responsibility Act.
He argued that combining stronger gold-backed reserves with disciplined government spending could enable Ghana to escape what he described as the country’s recurring “boom-bust-IMF cycle.”
“If we combine gold-backed reserves with the fiscal discipline Dr. Bawumia has always advocated — zero tolerance for unbudgeted expenditure and strict adherence to the Fiscal Responsibility Act — then yes, Ghana can credibly exit the boom-bust-IMF cycle for good,” Dr Boako maintained.
By 1960news.com
