Government to review Gold purchases, Gold-for-Oil Program as IMF proffers stricter monetary financing limits

The government has announced its intention to review gold purchases and the Gold-for-Oil program, focusing on addressing the associated risks for the Bank of Ghana (BoG).

In line with the 2023 report from the International Monetary Fund (IMF), amendments will be made to the BoG Act to establish a more stringent limit for monetary financing. The changes will also introduce mechanisms to monitor and enforce compliance, as well as provide a clear definition of emergency situations that may temporarily lift the limit.

While awaiting legislative modifications, the BoG and the Ministry of Finance have signed a Memorandum of Understanding (MoU) to eliminate monetary financing during the program.

An ongoing updated Safeguards Assessment will offer additional support in shaping the revisions to the BoG Act, with particular emphasis on the government's gold purchase and gold-for-oil programs, as well as the associated risks for the BoG.

The restructuring of debt will impact BoG's balance sheet. Therefore, the government and the BoG will assess the consequences and develop plans for recapitalization, with technical assistance and support from the IMF.

The BoG has expressed its commitment to conducting a comprehensive analysis of the risks it faces under the government's Gold-for-Oil program. The findings of this analysis will be reported to the IMF Executive Board.

Additionally, the Bank of Ghana has stated that it will gradually withdraw from the Gold-for-Oil program as the economy stabilizes.

According to the report, the government introduced the Gold-for-Oil program as a temporary initiative to ensure sufficient fuel supplies at favourable prices.

The government pledges to ensure transparency in contractual volumes, pricing structures for commodity exports and imports, and intermediaries' margins. It will implement the program in accordance with the applicable legal framework, discussing fiscal risks with the Ministry of Finance.

Regular performance audits of the scheme will be conducted by the Auditor General. Furthermore, the Bank of Ghana will adhere to international best practices and central bank safeguards standards in its gold purchases.

The gold-for-oil framework will also align with IMF Article VIII.