Cedi Stability, booming gold exports: Let’s look beyond the ‘pretty results’ to focus on sustainability – Bright Simons

Honorary Vice President of IMANI Africa and Founder of mPedigree, Bright, says that beyond the optics, persons interested in policies should pay attention to how the Cedi stability and the booming gold export can be sustained.

Bright Simons suggested that the government should conduct a sensitivity analysis and calibrate various gold-linked policies to different probable prices.

After which, he added, it should stress-test policies such as gold-for-reserves against low gold prices.

Ghana’s exports surged to $9.33 billion in April 2025, due to strong performances in gold and cocoa, according to the Bank of Ghana’s Economic Summary Report for May.

The growth, according to the report, helped to increase Ghana’s trade surplus to $4.14 billion, equivalent to 4.7 per cent of Gross Domestic Product (GDP).

Gold led the export sector with total earnings of $5.24 billion, accounting for 56 per cent of exports following a sharp increase from $3.72 billion in March as international prices climbed to $3,218 per ounce.

The local currency has also been gaining strength against the major trading currencies. As of Monday, May 26, it was buying at 10.9445 to a dollar and selling at 10.9555, according to the rate from the Bank of Ghana.

Governor of the Bank of Ghana, Dr Johnson Asiama, attributed the stability of the Cedi to a number of factors, including a tight monetary stance, ongoing fiscal consolidation, record reserve accumulation, and strict enforcement of the forex market rules.

Addressing the 124th Monetary Policy Committee (MPC) press conference in Accra on Friday, May 23, Dr Asiama stated that the Cedi had “rebounded strongly against the major trading currencies.”

“We are observing it continuously, though. The appreciation is largely driven by the market,” he said.

In a post on his X page, Bright Simons stated that  “I accept that the politics of the rising Cedi and booming gold exports are great optics for the government. But as I often say whilst POLITICS are about the aggregate results (the WHATs), POLICY is about the HOWs. Those of us focused on policy must look beyond the pretty results to how they can be sustained.

“For example, how much gold should Ghana have in its forex reserves? The Opposition accuses the Ruling Party of not increasing the gold portion of reserves at the same pace as before. Look carefully at the chart attached. You would see that gold has hovered around 30% of reserves for a while. Should the government push it higher?

“Sound policy analysis is needed to take such decisions. In a well-functioning society, the quality of such decisions would be as important as the POLITICS of an appreciating Cedi. Where the link between sound policy and good politics is broken, you get KATANOMICS. The danger there is that if, as some analysts fear, the HIGH PRICE of gold is what is causing the magic, then a major fall in gold prices can disrupt all the fine results. Then the same citizens who were full of praise would now turn on the government.”

Below is his full post…

I have been asked to make my MAIN point about gold & the Cedi in a shorter post. Let me try.

Ghana’s fiscal & monetary policies are being tethered too strongly to gold, at a time when gold prices have moved to an unprecedented high.

The government should conduct sensitivity analysis and calibrate various gold-linked policies to different probable prices. After which it should stress-test policies such as gold-for-reserves etc. against low gold prices.

I accept that the politics of the rising Cedi and booming gold exports are great optics for the government. But as I often say whilst POLITICS are about the aggregate results (the WHATs), POLICY is about the HOWs. Those of us focused on policy must look beyond the pretty results to how they can be sustained.

For example, how much gold should Ghana have in its forex reserves? The Opposition accuses the Ruling Party of not increasing the gold portion of reserves at the same pace as before. Look carefully at the chart attached. You would see that gold has hovered around 30% of reserves for a while. Should the government push it higher?

Sound policy analysis is needed to take such decisions. In a well-functioning society, the quality of such decisions would be as important as the POLITICS of an appreciating Cedi. Where the link between sound policy and good politics is broken, you get KATANOMICS. The danger there is that if, as some analysts fear, the HIGH PRICE of gold is what is causing the magic, then a major fall in gold prices can disrupt all the fine results. Then the same citizens who were full of praise would now turn on the government.

At current prices, the value of gold in Ghana’s reserves is ~$3.6bn. Just last year, the same amount of gold would have been worth ~$2.3 billion. Whilst the gold portion of our reserves today can cover 1.7 months of imports, the same amount of gold exactly a year ago would have covered just about a month of imports. In short, gold is a volatile component of our reserves.

How then to decide whether to keep increasing the gold stock in the reserves? Normally, though not every time, when the dollar is weak, gold prices would be rising. When the dollar regains its strength, gold prices fall. On that naive basis, gold is often not as useful as raw dollars when you need to strengthen the currency.

Buying gold at high prices right now to sell to cushion the currency, just at the same time that the dollar is weak doesn’t seem like a very sharp policy move. Unless you just want GLOSSY POLITICAL OPTICS.

Hoarding more gold when its price is this high in the belief that you will sell the gold to back the Cedi when the dollar regains its strength is quite risky since you will be selling at a loss for less dollars than you may need.

In short, these are very complex policy considerations that require very diligent analysis. I am sure even the shallow bits I have hinted above is making your head spin as an average citizen. More rigorous calculations can show that everything I’ve said is tosh. But that’s the whole point of SERIOUS POLICY DEBATE. That is why serious societies need strong policy communities. Whilst the citizens hold the govt accountable for aggregate welfare results (political accountability), the policy ecosystem holds it accountable for discrete policy performance (policy accountability). If that doesn’t happen, then you get KATANOMICS.