By Felix Cofie
A new policy debate has emerged over Ghana’s Domestic Gold Purchase Programme (DGPP), following a publication by businessman and policy commentator Mr. Senyo Kwasi Hosi, who argues that the reported US$214 million cost incurred under the programme should not be described as a loss but rather as an acceptable “policy cost.”
In a detailed response, the Kandifo Institute says that argument does not hold up to serious economic scrutiny.
What’s at the Heart of the Dispute?
The DGPP, introduced in 2021 and operationalised through GoldBod, was designed to boost foreign exchange inflows, build reserves, stabilise the cedi, and reduce gold smuggling.
Mr. Hosi contends that although GoldBod reported losses, the programme delivered macroeconomic benefits—such as cedi appreciation, reserve accumulation, easing inflation, and lower cedi-denominated debt servicing—and therefore should not be judged as a failure.
The Kandifo Institute agrees that Ghana experienced short-term macroeconomic stabilisation, but insists that this does not erase the reality of the financial loss.
Why Kandifo Says the US$214 Million Is a Real Loss
According to the Institute, the central flaw in Mr. Hosi’s argument is the attempt to separate accounting losses from economic losses.
In standard monetary and central banking theory:
• The integrity of a central bank’s balance sheet matters.
• Persistent operational losses undermine credibility.
• Such losses ultimately fall on the consolidated public sector.
• They create future fiscal liabilities through recapitalisation.
“In simple terms,” the Institute argues, “a loss recorded by GoldBod or the Bank of Ghana is, by definition, a loss to the State.” Calling it a “policy cost” may soften the language, but it does not change the economic reality.
Questioning the Attribution of Macroeconomic Gains
Kandifo also challenges the claim that GoldBod was the primary driver of Ghana’s 2025 macroeconomic stabilisation.
The review period coincided with several powerful external and policy factors, including:
• Historically high global gold prices
• IMF programme signalling effects
• Fiscal consolidation and spending restraint
• Debt restructuring under the G20 Common Framework
• Tight monetary policy by the Bank of Ghana
The Institute argues that Mr. Hosi’s analysis fails to isolate GoldBod’s marginal contribution from these broader forces, leading to what it describes as serious attribution bias.
Smuggling Claims and Weak Evidence
Another point of contention is the assertion that nearly one-third of Ghana’s gold output was previously smuggled and later recovered through the DGPP.
Kandifo notes that this claim relies heavily on mirror trade data, which economists widely regard as unreliable for estimating illicit flows due to re-exports, reporting delays, and price distortions. Without independent verification, the Institute says increased recorded exports cannot automatically be credited to reduced smuggling.
FX Losses Expose Structural Weakness
The Institute is particularly concerned by the explanation that GoldBod absorbed foreign exchange losses by compensating miners for FX differentials.
In Kandifo’s view, this effectively turns GoldBod into a foreign exchange subsidy mechanism, shifting market distortions onto the central bank’s balance sheet rather than fixing them. Far from strengthening macroeconomic architecture, it warns, this approach weakens it.
“Savings” or Just Accounting Effects?
Mr. Hosi’s publication also presents lower cedi-denominated debt service and import costs as economic “savings” linked to GoldBod’s activities.
Kandifo disagrees, stressing that these are largely exchange-rate translation effects, not real resource gains. True economic welfare improvements, it argues, require higher productive capacity or reduced real use of foreign resources—not just favourable currency movements.
The Sustainability Question
Perhaps the most serious omission, according to the Institute, is the lack of a sustainability analysis.
The DGPP’s apparent success is heavily dependent on high gold prices and positive external sentiment. If gold prices fall or FX pressures return, the same structure could magnify losses, increase recapitalisation risks, and erode monetary credibility.
Sound policy evaluation, Kandifo insists, must be forward-looking, not just a retrospective celebration of short-term outcomes.
A Broader Governance Warning
Underlying the debate is a deeper concern about economic governance. Kandifo rejects the idea that positive macroeconomic outcomes can justify institutional financial indiscipline.
Effective policy, it argues, must deliver results and preserve institutional sustainability—one cannot be sacrificed for the other.
The Bottom Line
The Kandifo Institute does not deny that GoldBod and the DGPP may have contributed to short-term stabilisation. However, it firmly maintains that the US$214 million reported cost is a real, measurable loss borne by the public sector, with implications for future fiscal and monetary policy space.
The solution, it concludes, lies not in rhetorical reclassification, but in transparent acknowledgment, cost containment, and structural reform—especially in aligning Ghana’s foreign exchange market with sound economic principles.
