Bawumia: BoG to have first right of refusal for all gold mined in Ghana

The vice-president, Mahamudu Bawumia, has said that Ghana’s decision to return to the International Monetary Fund for a 18th programme with the Fund must encourage the resolve to maintain enhanced fiscal discipline and also a stronger commitment to building modern systems, including monetary reserves, which will ensure sustainable economic development.

One of the monetary interventions the country intends to make is to ensure that the Bank of Ghana exercises its first right of refusal on purchases of all gold mined in Ghana, Dr Bawumia said. The country is also working towards acquiring international certification for locally refined gold products. These are among a raft of measures the Government of Ghana is taking to stabilise the cedi and ensure macroeconomic stability.

The vice-president was speaking at the launch in Accra of a collaboration between the Accra Business School and South East Technological University of Ireland on Thursday (14 July 2022). Vice-President Bawumia said the government’s decision to seek support from the IMF is to counter two external factors – COVID-19 and the war in Ukraine – which have ravaged economies globally and must be a wake-up call to developing countries.

One of the most important measures that should give Ghana the buffers the economy needs, the vice-president said, is a right of first refusal for the purchase, at world market prices, of all gold mined in the country. This will build up Ghana’s gold reserves and ensure greater stability of the cedi.

The government has been implementing forward-looking measures to ensure that Ghana is not damaged by the economic shocks that countries worldwide are experiencing, he said, and it will continue to do so. The effects of the global downturn have prompted Ghana to engage the International Monetary Fund to seek assistance with the country’s balance of payments.

Dr Bawumia announced that to help the Bank of Ghana ensure it can exercise its right of refusal, the government is also working to help acquire the necessary certification for refineries in Ghana and to help set up more refineries.

“Notwithstanding [our] being one of the big gold producers in the world, Ghana’s reserves of gold at the central bank at the end of 2021 were only 8.7 kilograms,” he said. “It was against this background that the Bank of Ghana started a gold purchase programme from gold producers to build up its foreign exchange reserves.

“To enhance this programme, the government will implement a new policy (which is already backed by law) under which the central bank [the Bank of Ghana] will have first right of refusal for all gold mined in Ghana. The central bank will purchase the gold at world market prices and the mining companies will export the portion that is not purchased by the Bank of Ghana.

“Ultimately, once we accumulate enough gold, future borrowing and our currency can be backed by gold. This will stabilise the cedi long term,” Dr Bawumia explained.

Ghana must also increase the benefits she accrues from mining her minerals by adding value to them, the vice-president said. Hence the recent commissioning of a national assay lab by the Precious Minerals Marketing Company (PMMC) and ongoing efforts to acquire international certification for existing refineries.

Gold as a key to industrialisation

“We must … deepen our industrialisation through value addition to gold,” the vice-president said.

“Even though Ghana has two gold refineries, none has London Bullion Market Association (LBMA) certification. This limits our full participation in the gold value chain. We will urgently work towards LBMA certification for our refineries in the next few years.

“Value addition to minerals such as lithium and bauxite will similarly be pursued in addition to the One District, One Factory (1D1F) programme and the continued implementation of the automotive sector policy.”

Ghana must make a renewed effort to strengthen the modern economic systems the government has been putting in place, he said, which will help the country to be more self-reliant in the future.

Dr Bawumia stressed that the twin external factors of COVID-19 and the war in Ukraine – which, he said, have led many other countries to the IMF for support in response to the rising cost of living and widespread inability to sustain debt levels – have also exposed the need for Ghana to put in place measures that will ensure greater fiscal discipline.

“The major lesson of the last two years is that we have to be more self-reliant as a country,” Bawumia said. “It is important that we take decisions that will … benefit … the country regardless of whether we are going to the IMF for a programme or not.

Goal: sustainable debt

“The immediate task is to restore fiscal and debt sustainability – through revenue and expenditure measures and structural reforms. Non-concessional borrowing should be curtailed to enhance debt sustainability,” the vice-president said.

Dr Bawumia also observed that successive governments have failed to achieve long-term economic stability after each of the past 17 IMF programmes, because Ghana has lacked the systems to ensure sustainable stability, hence the government’s focus on ensuring such systems be put in place.

“I should note that Ghana has gone to the IMF for a programme 17 times since independence and, after each IMF programme, the underlying system and structure of the economy remained the same,” the vice-president said.

“It is important to note that the focus of economic management by successive governments since independence in Ghana has been on crisis management as a result of factors such as the collapse in commodity prices, increase in oil prices, debt unsustainability, political instability, macroeconomic instability, etc.

“[Our] governments have, by and large, not focused on building the systems and institutions that underpin economic activities in a modern economy.”

Bawumia argued that the modern tools Ghana needs to ensure sustainable economic development are “the systems that will reduce bribery and corruption, the systems that will make the delivery of public services efficient, the systems that will enhance domestic revenue mobilisation, and the systems that will make life generally easier for Ghanaians”.

The vice-president noted that since 2017, the Government of Ghana has been focused on building these systems, which include a biometric national identity card and a functioning digital property address system, as well as an aggressive financial inclusion programme, digitisation of government services and many other frameworks which, he said, are enhancing services and making access easier, even as they reduce corruption and strengthen domestic revenue mobilisation.

As such, Vice-President Bawumia called for a renewed focus on building and strengthening such systems, alongside enhancing fiscal discipline, to ensure sustainable economic recovery after Ghana enters and completes an 18th IMF programme.

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