‘$5bn in gold or $3bn in loans; we chose sovereignty’ – Bawumia defends gold strategy

Former Vice President Dr Mahamudu Bawumia has mounted a strong defence of his government’s controversial decision to ramp up gold purchases instead of relying solely on loans.

Speaking to members of the Young Executive Forum (YEF) during his Thank You Tour of the UK, the 2024 flagbearer of the NPP, described the move as a choice between economic sovereignty and dependency.

“$5 billion in gold or $3 billion in loans – we chose sovereignty,” he declared, arguing that the Bank of Ghana’s gold purchase program was the bedrock of the cedi’s current strength.

“In two years, Bank of Ghana had bought $5 billion worth of gold,” Dr. Bawumia said.

“Remember, we were going to the IMF just for $3 billion, and going through all sorts of hoops. But in two years, we had bought $5 billion.”

He said the results were unmatched.

“We increased the gold reserves in Ghana from 8.7 tons to 30 tons. So, 65 years after independence, we only had 8.7 tons, but in just two years, we went to 30. That is a big backing for the currency.”

He explained why the gold path was more logical. “Why I went for gold is that you don’t need to export to get gold. You need to export cocoa to get foreign exchange, timber, and oil, you need to turn it abroad. But as for gold, you just need to dig it or pay for it with cedis. So it was a much easier way to do it.”

Dr. Bawumia also dismissed any credit to the opposition for the recent appreciation of the cedi.

“If you are to ask the NDC to point out exactly what policy they have implemented that has resulted in the appreciation of the cedi, they cannot tell you one.

“Not sort of talked about, but actually implemented. They only passed their budget in March. They’ve not even issued any contracts and paid for anything.”

He stressed that the foundation of the current cedi performance lies in decisions made under the NPP.

“People, after all the noise of the election, are paying attention to our reserves. That is one thing which we have built to 30 tons. They have been in office so far, they’ve not even increased it by one ton. Not a single one ton.”

Dr Bawumia pointed to three main drivers of the cedi’s performance: Ghana’s gold-backed currency, global dollar weakness, and fiscal restraint under the current administration.

“The US dollar itself is on the decline globally. If you go to Zambia, for example, the Kwacha has gained a lot of ground also because you have the US dollar declining in value.”

He claimed the current government’s inaction is also playing a role.

“They are not spending. If you are managing an economy, you have to pay your bills. They are not paying IPPs, for example.

“This is why the dumsor is so acute. And they are not paying contractors. When you are not spending, there is less pressure on your currency.”

Dr Bawumia warned that the sustainability of the current macro stability depends on how the new administration manages what has been built.

“I believe that it is clear that what we put in place – and I believe this is going to be there for a long time – should help us maintain stability in the currency. But we’ll see how they manage it going down the road.”

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