BoG adds gold purchase to shore up foreign reserves

The Bank of Ghana has introduced a domestic gold purchase programme which is aimed at diversifying the traditional means by which the country builds its foreign exchange reserves, governor of the Bank of Ghana, Dr. Ernest Addison has announced.

The domestic gold purchase programme, according to the governor, will pave the way for the central bank to grow its foreign exchange reserves to foster confidence, enhance currency stability, create a more attractive environment for foreign direct investments and economic growth. It will further enable the bank leverage its gold holdings to raise cheaper sources of financing to provide short-term foreign exchange liquidity. Speaking at the launch of the programme in Accra, Dr. Addison said the programme will, among other benefits, provide the country a cheaper means of building its foreign reserves.

“Bank of Ghana views the gold acquisition programme as an efficient way of growing the foreign exchange reserves of the country to supplement the traditional ways that Ghana has built reserves over the years. Among others, this will help reduce our dependence on more expensive ways of building reserves.

The gold purchasing programme will bring revolution to the small-scale gold mining sector. Ghana’s domestic purchasing programme for gold has the potential to improve the small-scale gold mining sector by guaranteeing, that they receive a fair purchasing price for their gold, provide an incentive to formalise and move away from damaging environmental and social practices.

It would also lead to a route to formalise and improve ability to sell into formal gold markets and thereby reduce their vulnerability to illegal actors in the domestic and international gold supply chains,” he said.

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How the programme will work

Details given by the governor show dore gold (unrefined gold) purchased from a gold aggregator will be assayed by the Precious Minerals Marketing Company (PMMC) to test its quality. Following this, the PMMC will submit an assay report to BoG on the day of delivery. Using the agreed pricing sources for gold and the cedi/dollar exchange rate, the value of the gold supplied will be determined and paid for within 48 hours to the aggregator.

At the next stage, BoG will aggregate the assayed dore gold purchases at its vaults and from time to time, send the validated dore gold to an LBMA-certified refinery to be processed to the required international standard of good gold delivery (fineness of 99.99%).

BoG has also engaged other domestic mining firms in collaboration with the Ghana Chamber of Mines to buy refined gold from their refineries. Presently, only one gold aggregator has been selected for the programme after an independent due diligence was conducted. This will be expanded to other gold aggregators who will be eligible to participate in the programme once a roadmap is developed to ensure they meet the governance, risk, compliance and supply chain requirements.

Source: B&FT