Harness gold reserves to unlock liquidity for devt - Prof. Alagidede to the State
A Professor of Finance at the University of Ghana, Professor Yegandi Imhotep Paul Alagidede, has called for the responsible extraction of Ghana’s abundant gold reserves to make funds available to bolster national development.
He said the proven reserves of gold in Ghana’ soil was around 1,000 tonnes, valued around $146 billion, which formed part of its natural asset base, valued at about $1.5 trillion.
The professor of finance said if the country could extract just around 60 per cent of the gold it had, it could release between GH¢634 billion and GH¢952 billion into the fiscal space.
That, he said, would enable the country to bring in a significant amount of resources domestically so as to become less dependent on the International Monetary Fund (IMF) and the World Bank.
“So, the fiscal comparison is that Ghana’s total budget in 2024, which is around GH¢226.7 billion, could all have been funded domestically without looking outside,” he said.
Big paradox
Delivering a public lecture, titled “Rich in gold, poor in liquidity” in Accra , Prof. Alagidede, who is also the Bank of Ghana Chair of Finance and Economics at the university, said by activating about 50 per cent of Ghana’s gold equity, it was enough to fund about four years of its national expenditure without borrowing a single pesewa from outside the country.
“So, if we can activate just around 40 per cent to 60 per cent of just the gold that we have, holding all our resources constant, assuming we do not have any other resource, cocoa, shear nuts, lithium, manganese and others, we can unlock domestic liquidity creation, support the currency and national development.
“So, the illusion of poverty is that Ghana's in-situ gold, which is now valued around $1.5 trillion, is really quite significant,” he said.
“So, we live in the very big paradox – a wealthy nation that is walking with a cup in hand, begging,” Prof. Alagidede added.
The lecture was organised by the Centre for Policy Scrutiny (CPS). It was supported by Joy Business.
Ghana not poor
The Bank of Ghana Chair in Finance and Economics at UG said over the past 60 years, Ghana’s economy had been constantly looking out for liquidity buffers in spite of the fact that liquidity was already within the economy.
Per data available, Prof. Alagidede said Ghana had been to the IMF about 18 times in the last 60 years, and visited the fund 10 times since it embraced democratic governance in the last 35 years.
“This has been an economy that at the same time has tremendous amount of resources that can be unlocked for domestic liquidity,” he said.
He pointed out that the current system of national accounting only counted visible gold that left the shores of Ghana, meaning that “we are forced to borrow paper from abroad while sitting on the bedrock of wealth at home”.
“Speaking in real terms, Ghana is not a poor country as this is a very rich nation.
“It is a rich house with a locked door, but we have been begging for bread on the streets while our greenery is full simply because we have lost that key to our balance sheet,” he said.
In the view of Prof. Alagidede, the country could create its own liquidity without triggering inflation if that liquidity was anchored and verified in the resource that the people had in abundance – gold.
Keep gold as currency
With gold being one of the most important metals globally, the professor of finance said the largest concentration of gold was found right in Ghana.
“In fact, some have valued our gold to be one of the richest in the world.
You can get as much as 21 carat gold here.
“But the balance is that we have not been able to translate this gold into the reserve, but elsewhere, this gold has made kingdoms, the crowns of kings and queens in different lands,” he said.
Referring to gold as not only the yellow metal alone, but also the white metals, green metals and other sources of black gold and oil, Prof. Alagidede said unlocking those resources would allow Ghana to have a great potential for liquidity that could back its monetary system.
Being the sixth largest producer of gold in the world, Ghana is making roughly around 340 tonnes of gold a year.
Reserves
In terms of central bank reserves, Prof. Alagidede said Ghana had actually done quite well in the last five years compared to the previous 60 years, with roughly 38 tonnes of gold held in its reserves.
“And the argument from the economics point of view is that we can do much, much better by keeping the gold right here rather than taking it, saving it for dollars which you use to then support the reserves,” he said.
He argued that establishment of the Gold Board , which he described as a “a baby steps”, had been a success story in less than a year.
Prof. Alagidede said while the rules about how gold was treated had been changed, currently most of the large-scale mines just shipped gold out.
“It goes to support other currencies and we have to go back and get that money back here.
"So, if you change the rules about how that is done, it just keeps the money right here,” he said.
GoldBod
Prof. Alagidede pointed out that it was time Ghana kept its gold as a form of currency since it was an anchor to the cedi, saying that “we must not sell our gold and get dollars because the dollar is still a fiat currency”.
He commended the Ghana Gold Board (GoldBod) for mobilising around $10.8 billion.
That, he said, was around $117 billion in a single year from just small-scale artisanal mines, acknowledging the huge cost galamsey had been inflicting on water bodies and the environment.
