The foreign exchange valuation and accounting treatment adopted under Ghana’s Domestic Gold Purchase Programme (DGPP) accounted for a significant portion of the reported US$1.7 billion loss, Director of Research at the Institute of Economic Affairs (IEA), Prof. Alexander Bilson Darku, has said.
Prof. Darku explained that the loss should not be attributed to the Ghana Gold Board (GoldBod), arguing that the figure was recorded on the books of the Bank of Ghana (BoG), which was responsible for the programme’s financial transactions.
Speaking on Channel One TV’s The Point of View on Wednesday, September 2, he said the public debate had wrongly framed the issue as a loss incurred by GoldBod.
According to him, GoldBod operated as an agent of the central bank under the DGPP, purchasing gold on behalf of the BoG before the gold was exported and the proceeds received in foreign currency.
“The IMF report that you made reference to does not say that GoldBod made a loss. It says the central bank is making a loss. It says that it sits on the central bank books,” he said.
Prof. Darku said the major component of the reported loss was linked to foreign exchange valuation, arising from differences between the exchange rate applied when GoldBod purchased the gold and the rate used by the BoG when recording the dollar proceeds in cedis.
He explained that the BoG records the dollar inflows from gold exports in cedis using its official exchange rate, which, according to him, was lower than the rate at which GoldBod purchased the gold on behalf of the central bank.
“And the major part of that loss is the foreign exchange valuation,” Prof. Darku said.
He stressed that GoldBod could not be held responsible for the exchange-rate treatment, arguing that the decision was linked to government and central bank policy.
“I do not think it was the decision of GoldBod to buy the gold at the forex rate. It is a decision of the government through the central bank,” he said.
The IEA Director of Research also said the reported loss included fees and discounts paid by the BoG to GoldBod under the programme.
He explained that while such payments could appear as costs on the central bank’s books, they could simultaneously constitute revenue for GoldBod.
“We even went ahead to show you the component of that loss, that it is the fees, the discounts, and all those things, that the central bank paid GoldBod,” he said.
Prof. Darku noted that there had been an argument that the cost of the DGPP should have been absorbed by government through the national budget because of the programme’s quasi-fiscal nature.
“Many people argue that it should not have sat there; it should rather be absorbed by government in its budget, because it is quasi-fiscal,” he said.
He maintained, however, that regardless of the preferred accounting treatment, the reported loss was ultimately reflected on the BoG’s books.
He therefore urged participants in the debate to focus on the circumstances that resulted in the central bank’s loss rather than suggesting that GoldBod itself incurred the US$1.7 billion loss.
“So if we are discussing, we should discuss whether, why did the central bank make that loss or not,” Prof. Darku said.
His comments come amid renewed public scrutiny of the financial implications of the DGPP following the disclosure of losses associated with the programme.
