"Gold Helping Shield the Cedi: Prof. Gatsi Calls for Deep Structural Reserve Anchors"

" Gold Helping Shield the Cedi: Prof. Gatsi Calls for Deep Structural Reserve Anchors \r\n\r\nIn an interview with NorvanReports , renowned economist and Dean of the University of Cape Coast School of Business, Professor John Gartchie Gatsi , has offered a candid and deep analytical take on Ghana\u2019s recent international reserve accumulation, the cedi\u2019s appreciation, and the broader implications of the government\u2019s resource-backed forex strategies, particularly gold, aimed at diversifying reserve-building\u00a0sources to solidify strategy\r\n\r\nWith Ghana\u2019s gross international reserves climbing 16% between January and April 2025 and the cedi appreciating from GHS15\/USD to GHS11.9\/USD, public discourse has turned increasingly optimistic. But Prof. Gatsi offers a more measured perspective.\r\n\r\n\u201cReserves are a mirror, not a mask,\u201d he began. \u201cThey reflect economic resilience when built on production, not when propped up by short-term capital injections or gold swaps that don\u2019t address structural gaps.\u201d\r\n\r\n Reserves: A Buffer or a Crutch? \r\n\r\nAsked whether Ghana\u2019s current reserve levels signal genuine progress, Prof. Gatsi cautioned against \u201ccosmetic comfort.\u201d He said that the 16% reserve growth is good, but sustainability depends on how reserves are built and used.\r\n\r\n\u201cThe obsession should not just be with import cover ratios or IMF program targets,\u201d he stated. \u201cThe quality of reserves\u2014how they are sourced and how liquid they are\u2014is what really determines macroeconomic safety.\u201d\r\n\r\nAccording to him, evaluating reserve adequacy must move beyond headline numbers to include three key ratios:\r\n \r\n \t Reserve to Import Ratio \u2013 How many months of import reserves can be covered. \r\n \t The Reserve to GDP Ratio \u2013 Measures the size of reserves in relation to the national output. \r\n \t Reserve to External Debt Ratio \u2013 A country\u2019s ability to meet foreign debt payments without stress. \r\n \r\n\u201cThese indicators show us if we\u2019re merely servicing old debts with new inflows or truly reducing risk,\u201d Prof. Gatsi emphasised.\r\n\r\n On Gold-for-Forex: Necessary or Misguided? \r\n\r\nThe government's controversial Gold-for-Forex strategy, which uses gold purchases to bolster foreign reserves while avoiding the dollar market, quickly came up in conversation. Prof. Gatsi expressed concern about overreliance on this model.\r\n\r\n\u201cGold should complement reserves, not carry them,\u201d he said. \u201cWe cannot build sustainable external buffers by monetising unprocessed gold and calling it a forex strategy.\u201d\r\n\r\nHe questioned the transparency and impact of the gold-for-oil and gold-for-reserves policies, noting that while such schemes may reduce spot market demand for dollars temporarily, they don\u2019t build lasting investor confidence or export competitiveness.\r\n\r\n\u201cWhat Ghana needs is a resource management framework that values value addition over volume extraction . Selling raw gold to buy fuel or dollars merely recycles dependency,\u201d he argued.\r\n\r\n Cedi Strength: Fundamentals or Fragility? \r\n\r\nResponding to recent optimism about the cedi\u2019s appreciation, Prof. Gatsi was again cautious. \u201cCurrency strength, when not backed by fundamentals, becomes currency fragility,\u201d he warned.\r\n\r\nHe noted that the cedi\u2019s recent rally, though welcomed by importers and policy hawks, may prove short-lived if reserve inflows are not underpinned by real-sector exports and productivity gains.\r\n\r\n\u201cA stronger cedi should come from stronger exports, not from temporary inflows or liquidity swaps,\u201d he said. \u201cOtherwise, we\u2019ll be back at GHS15\/USD sooner than we think.\u201d\r\n\r\n Organic Reserves: The Path Forward \r\n\r\nProf. Gatsi\u2019s core argument is that Ghana must embrace organic reserve accumulation , reserves built through diversified production, enhanced mineral value chains, improved cocoa processing, and manufacturing expansion.\r\n\r\n\u201cWe have lithium, bauxite, gold, oil, and gas, but we must refine, process, and export finished products . That is how reserves become a byproduct of value creation, not debt,\u201d he explained.\r\n\r\nHe advocated for a new reserve philosophy, one tied not only to economic indicators but to national development goals. This includes:\r\n \r\n \t Export diversification with a focus on non-traditional exports. \r\n \t Building domestic gold refineries to retain more forex. \r\n \t Strategic hedging and sovereign wealth instruments. \r\n \t Reducing import dependence for refined petroleum and pharmaceuticals. \r\n \r\nAs Ghana eyes a return to international capital markets by 2026, Prof. Gatsi stressed the importance of credibility in reserve management. \u201cMarkets are watching not just the numbers but the story behind the numbers,\u201d he said.\r\n\r\nHe called for greater transparency in reserve reporting , stronger parliamentary oversight of resource-backed deals, and institutional autonomy for the Bank of Ghana in managing foreign assets.\r\n\r\n\u201cThe reserve book should never be used as a political trophy,\u201d he added. \u201cIt is the country\u2019s economic bulletproof vest, one we must treat with discipline and foresight.\u201d"

"Gold Helping Shield the Cedi: Prof. Gatsi Calls for Deep Structural Reserve Anchors"

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