Who Will Bell the Cat? Ghana’s Gold strategy and the strangling of dollar liquidity

Who will bell the cat? That is the question many are now asking as Ghana’s foreign exchange liquidity tightens in unexpected ways. In the early part of 2025, the Ghana Cedi appreciated by an impressive 16%, buoyed by rising gold exports and a renewed sense of macroeconomic stability. On the surface, it looked like Ghana had turned a corner.

Yet beneath the glossy headlines, importers, banks and forex dealers are grappling with a more troubling reality. Access to dollars is becoming harder, not easier. The paradox is striking. How can reserves be swelling while FX is drying up on the street?

Part of the answer lies in the creation of the Ghana Gold Board (GoldBod), established in May, 2025 to centralize small-scale gold exports, plug illicit trade routes and channel FX through a single, state-controlled gateway. In one sweeping stroke, the government revoked all existing export licenses, banned foreign traders and positioned GoldBod as the sole conduit for gold leaving Ghana’s borders ostensibly in pursuit of order and efficiency. The goal was clear. It was to ringfence Ghana’s most valuable resource in service of fiscal strength and currency stability. But like the cautious mice of Aesop’s fable, stakeholders across the economy now whisper uneasily about the cost of this containment.

GoldBod’s centralization, even though bold and arguably necessary, has also introduced new constraints into the FX ecosystem. Banks and importers now operate in a system where dollar inflows are increasingly concentrated, but distribution remains tightly managed. At the same time, other factors such as the Bank of Ghana’s FX reserve requirements and sterilization efforts have amplified the liquidity strain. Although the gold-for-oil programme officially ended in March 2025, its legacy effects on FX dynamics and off-market flows continue to reverberate through the system.

These policies collectively form a complex web of intentions and outcomes. Notwithstanding that each may have merit on its own, their combined effect has triggered unintended ripples across the economy. What began as a plan to stabilize Ghana’s external position may now be creating pockets of dislocation, especially for private sector actors reliant on timely and predictable dollar flows.

In this unfolding economic tale, the proverbial cat is not just GoldBod, but the broader policy architecture surrounding FX management. And so, the question remains. Who will bell the cat? Who will take the difficult step of confronting the growing tension between strategic reserve-building and functional market liquidity?

Policy Background & FX Reserves Snapshot

Since March 2025, Ghana has strategically consolidated its gold trade through the newly empowered Ghana Gold Board (GoldBod). GoldBod has recently signed agreements to purchase 20% of gold output from several large-scale mining companies. Under its mandate, GoldBod revoked prior export licenses, barred foreign gold traders and claimed sole authority over artisanal and small-scale gold, effectively centralizing the export pipeline.

This kept gold flowing through official channels and helped the Bank of Ghana grow its gold holdings from 8.8 tonnes in mid‑2023 to nearly 33 tonnes by June 2025. A valuation released at the end of April put these holdings at approximately GH₵46.3 billion (US$2.6 billion).

The FX effect was immediate. Between February and April 2025, Ghana’s gross international reserves climbed from US$9.4 billion (4.2 months of import cover) to US$10.7 billion (4.7 months). The sharp rise coincided with a 16% to 24% Ghana Cedi appreciation against the US dollar by mid- 2025.

FX Liquidity versus Reserves

On paper, Ghana has bolstered its external buffers, but access to usable US Dollars, the lifeblood for importers and banks, is tightening. Industry insiders report delays across multiple fronts.

1. FX reserve mandates- The Bank of Ghana (BoG) has amended its reserve requirements to mandate that foreign currency deposits be backed by corresponding foreign currency reserves, tightening FX liquidity management and enhancing financial stability. This currency-specific reserve framework influences the availability of FX in the market by requiring banks and forex bureaux to hold adequate foreign currency reserves against their FX liabilities.
2. Sterilization measures- To prevent excess Ghana Cedi liquidity from destabilizing inflation and FX markets, the Bank of Ghana has deployed sterilization operations that absorb surplus liquidity. Even as these measures help stabilize inflation and exchange rates, they also contribute to tighter overall liquidity conditions, indirectly affecting the availability of foreign currency in the market.
3. Gold-for-oil swaps- Until its termination in March 2025, the GoldBod-led Gold-for-Oil barter agreements diverted some FX inflows by using gold to pay for petroleum imports. This mechanism contributed to constraints on liquid US dollar availability in the market. However, the policy is no longer operational and does not currently impact FX liquidity.

A Complicated Puzzle

GoldBod’s centralization aims to combat illicit gold flows. Smuggling reportedly cost Ghana an estimated US$11 billion in lost foreign exchange between 2017 and 2023. However, evidence suggests its effects on FX liquidity are only one piece of a larger puzzle.

I. Firstly, IMF-backed tightening
As part of an IMF-supported stabilization program, with inflation around 21% by April 2025 and the MPC maintaining a 28% policy rate, the Bank of Ghana is prioritizing macroeconomic stability over FX liquidity.

II. Secondly, higher FX reserve ratios
The BoG has amended reserve requirements to mandate that foreign currency deposits be backed by corresponding foreign currency reserves, systematically reducing the volume of US dollars available for trade and investment.

III. Finally, alternative settlements
Until its official termination in March 2025, the GoldBod-led Gold-for-Oil barter agreements diverted some FX inflows off-market by using gold to pay for petroleum imports, reducing liquid US dollar availability. The policy no longer operates but had contributed to FX liquidity constraints while active.

What This Means for the Market

I.    Ghana’s exporters enjoy record-high reserves, strengthening the cedi and reducing sovereign vulnerability.

II. Unfortunately, importers and FX traders face growing bottlenecks, with reports of dry interbank desks and limited access to official channels.

III.  The challenge now is to balance reserve accumulation with functional FX distribution, which is not simply pile up buffers, but ensure they’re accessible.

Market Sentiment and Policy Challenges

Industry insiders report that practical FX availability, not just headline reserve numbers, dominates market concerns. On trading floors, the focus is on empty interbank windows, delayed Letters of Credits (LCs) and the daily struggle to access dollars.

Even as the BoG’s policy rate remains at 28%, it largely demonstrates a commitment to stability over short-term liquidity. Again, with Ghana expecting to receive an additional $360 million from the IMF in July 2025, this may help further stabilize the cedi and ease some liquidity pressures.

Rising Premiums Across Exchange Channels

Notwithstanding an official interbank rate around GH₵10.30 – GH¢10.50/USD, forex bureaus and banks are charging GH₵12.50 – GH¢13.50, which represents a staggering 20% to 30% premium over the official rate. “The gap between the official rate and the rate ordinary Ghanaians pay is no longer tolerable. It is suffocating businesses,” warns Kokroko Oppong-Agyare, a financial analyst.

Official Messages from Banks versus Client Reality

In May 2025, the Bankers Association publicly stated there was no ban on over-the-counter (OTC) dollar withdrawals from foreign currency accounts. Yet, multiple banks have imposed internal caps, lit up “no withdrawal” messages to clients, or delayed FX availability with some importers waiting weeks for allocation.

Importers Stuck in the Middle

For importers, the liquidity crunch is more than frustrating, to say the least. It’s existential. According to Dennis Amfo Sefa of the Chamber of Freight and Trade, discrepancies at ports inflate costs. Notably;

Banks quote GH₵13/USD, but shipping lines use interbank or locked-in rates of GH₵14 – GH¢15/USD to calculate demurrage and charges. These hidden costs are then passed on to consumers such as spare parts, electronics, food, who are all impacted.

Cedi for Exporters, Dollars for Importers?

While Ghana exported 55.7 tonnes of gold worth approximately $5 billion in the first five months of 2025 under GoldBod’s stewardship, these inflows haven’t translated into operational FX in the market. The official reserves rose from US$9.4 billion to US$10.7 billion (February to April, 2025). Banks however report significant strain in meeting FX client demand and list backlog delays, even for priority sectors like fuel and pharmaceuticals.

Should the Banks or Rather, the System be Blamed?

Bank of Ghana interventions such as higher FX reserve ratios, sterilization operations and the now-terminated gold-for-oil swaps have arguably made access even tighter. As a result, Ghana functions like “two economies” with one on paper with plenty of reserves and another on the ground where FX is scarce, expensive and unreliable.

Key Takeaways

Ghana’s FX market is caught between official strength and on-the-ground weakness, a classic illustration of bountiful reserves failing to deliver fluid liquidity. But as I’ll detail in the next section, the real squeeze is felt in trading floors, boardrooms and backrooms across the economy.

Between SMEs & Foreign Investors, Who’s Really Paying the Price of FX Pressures?

Beyond banks and importers, the FX squeeze is hitting SMEs and foreign investors hardest. These groups typically lack the clout or reserves of large corporates but play a central role in Ghana’s economic growth and development.

SMEs Under Pressure

SMEs contribute 70% of Ghana’s GDP, generate 85% of manufacturing output and account for 92% of registered businesses. They have traditionally been engines of job creation and innovation. But today, many are gasping under tightened FX conditions. The Monetary Policy Rate (MPR) at 28% (as of mid-2025) represents a high borrowing cost environment, which significantly impacts SMEs’ access to affordable credit.

Compounding the problem, banks are shifting away from SME lending toward T-bills, citing high NPLs, a move attributed to constrained liquidity.

The FX scarcity compounds the problem. SMEs relying on imported inputs report delays of 2 weeks to 4 weeks for LCs and paying FX premiums of 30% to 40% over interbank rates. This squeezes margins or forces price hikes.

Impact on Foreign Investors & FDI Outlook

Foreign investors are also being rattled. According to Global Finance Magazine, Ghana’s FDI fell from US$2.5 billion in 2021 to US$1.3 billion in 2023, a contraction largely tied to macroeconomic instability and currency worries.

A sharp dual-rate system where official reserves look full, but street dollars cost 20% – 30% more, creates uncertainty.

Pension funds, with assets totalling GH₵78 billion (US$4.9 billion), have even been barred from offshore investment to preserve local liquidity, a sign of official concern over FX scarcity.

Even conditional IMF support (a US$370 million tranche disbursed in June 2025) hasn’t fully allayed investor fears. Regardless of the boom gold revenues of US$11.6 billion in 2024, the dualistic FX regime continues to spook foreign businesses

Is Ghana at Risk of a “Golden Dutch Disease”?

Ghana’s gold boom has delivered a powerful jolt to the economy. But standard economic models raise a red flag. Is the country unintentionally flirting with a form of Dutch Disease? The signs are there.

Gold Surge & Cedi Overvaluation

Gold exports hit US $11.6 billion in 2024, a 53% increase over 2023 and made up 57% of all exports. In Q1 of 2025 alone, gold earnings reached US $1.83 billion.

As reserves swelled from US$6.0 billion to US$10.7 billion between early 2024 and April 2025, boosting import cover from 2.7 to 4.7 months, the Ghana Cedi appreciated sharply from around GH¢15.50 to the USD (late 2024) to GH¢12.00 by May 2025. 

This strength, although welcome on paper, has the hallmarks of an “enclave” currency effect, where the gold-driven inflows lift the currency even as other tradable sectors suffer from elevated currency levels.

The Dutch Disease Mechanism

According to economic theory, sudden surpluses from a booming export like gold can cause;

1. Currency appreciation, hurting competing exporters and import-substituting industries.
2. Capital movement towards the booming sector, draining labour and investment from others.

In Ghana, approved gold-for-oil swaps (handling 30% of oil imports via gold) and Ghana Cedi appreciation have compressed margins for manufacturing, agro-processing and other non-gold industries. Anecdotal reports, such as an electronics SME paying GH¢14 -GH¢15/USD for imports, raise alarm as non-trade sectors struggle with funding.

Is It Dutch Disease (Yet)?

I. Yes, gold-driven FX inflows have contributed to Ghana Cedi strength and liquidity bottlenecks that affect private sector competitiveness.
II. No, the phenomenon has not fully materialized, as non-gold exports and manufacturing have not collapsed, but early warning signs are evident for SMEs, industrial output and foreign investment.
III. The challenge is compounded by policy blind spots, such as monetary tightening and FX measures focused on stabilization rather than sector-specific impacts.

Policy Choices to Avert Dutch Disease

To safeguard Ghana’s economy from the risks of Dutch Disease, a strategic and coordinated set of reforms is essential.

I. Continue Managed FX FlexibilityMaintain and refine a policy of controlled currency depreciation to support the competitiveness of non-gold sectors, while carefully managing inflation and macroeconomic stability.

II. Establish Differentiated FX Windows
Create dedicated foreign exchange allocations for non-mining industries at preferential rates below the interbank market, ensuring these vital sectors have reliable and affordable access to dollars.

III. Strengthen Non-Tradable Sector Growth
Accelerate investment in agro-processing, light manufacturing, and the digital economy to diversify the economic base and build resilience against fluctuations in gold prices.

Policy Roadmap for Steering Ghana Beyond the Golden Trap

Ghana’s gold-driven FX gains have fortified reserves but the current strategy is straining the real economy. Without interventions, the FX squeeze risks becoming structural. In the lines below, I have listed targeted, data-backed policy recommendations suggested for Ghana’s policymakers.

1. Introduce Dual FX Windows with Prioritized Allocation
2. Issue

Exported gold is funnelled through GoldBod, but downstream FX allocation is limited.

• Recommendation

Open a second FX window at slightly below-market rates (for instance between 0.5% – 1% below interbank) exclusively for non-gold sectors, SMEs, and essential imports.

Borrowers and importers currently paying premiums of GH₵13 – GH¢15/USD can access FX closer to the official GH₵10.30 – GH¢10.50/USD rate, easing bottlenecks without destabilizing reserves.

1. Recalibrate Bank of Ghana’s Reserve Requirements
2. Issue

As of June 5, 2025, foreign currency deposits must be backed by FX reserves, and cedis by cedi reserves, a policy tightening liquidity flexibility.

• Recommendation

Phase 1

Reduce the Dynamic Cash Reserve Ratio (CRR) on foreign currency from current 20% -25% tiered rates to 10% -15%.

Phase 2

Allow banks discretion to hold 15% – 20% of domestic CRR in FX. This means allowing part of the cedi reserve requirement to be held in foreign currency, thereby increasing cedi liquidity.

1. Leverage IMF/World Bank Support for Targeted FX Tools
2. Issue

IMF’s recent US$367 million disbursement in early July (totalling US$2.3 billion since 2023) offers breathing space.

• Recommendation

Utilize IMF funds to establish a stabilization FX Fund, guaranteeing allocations for vital imports, helping to maintain affordability while easing broader rate pressure. Such a fund could also help smooth volatility and build market confidence.

1. Catalyze Technical Assistance for FX Market Development
2. Issue

Ghana’s FX segments are fragmented with formal, informal, and special windows struggling to align.

• Recommendation

Solicit IMF/World Bank/AFD support to develop a secondary FX market, introduce FX hedging instruments for exporters and SMEs, reducing currency risk and encouraging investment.

Ghana’s gold-powered ascent has dazzled the macroeconomic scoreboard as reserves are up, the Ghana Cedi has rallied and inflation is slowly inching downward. But beneath that shine lies a growing tension. Aliquidity-starved private sector, SMEs gasping for FX and investors losing patience with dual-rate dysfunction.

This is not a crisis born of recklessness. It’s the by-product of bold but blunt instruments. The GoldBod regime was designed to plug illicit flows and boost reserve buffers and in that, it has largely succeeded. But like any strong medicine, dosage matters. The FX squeeze, if left unchecked, threatens to convert a promising structural reform into a chokehold on the economy’s productive core.

There is still time. With transparency, targeted liquidity channels, recalibrated monetary tools and a willingness to admit policy frictions, Ghana can avoid the fate of commodity-rich nations that stumbled under the weight of their own wealth. The question is no longer whether gold is working for Ghana. It is whether Ghana will work its gold wisely.

Who will bell the cat? That remains Ghana’s most urgent policy question.

Sources

1. Bank of Ghana, Monetary Policy Report – May & June 2025 (bog.gov.gh)
2. IMF Country Report, June 2025 (imf.org)
3. Ghana Statistical Service, Inflation Update Q2 2025
4. Ministry of Finance, Mid-Year Budget Review 2025
5. Bloomberg FX Tracker, Ghana Street Rates – June 2025 (bloomberg.com)
6. GoldBod Ghana, Export Control Updates – May 2025
7. Joy Business FX Market Watch – June 2025

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DISCLAIMER: The Views, Comments, Opinions, Contributions and Statements made by Readers and Contributors on this platform do not necessarily represent the views or policy of Multimedia Group Limited.