Business General

Govt planning to buy gold from mines with local currency – Bright Simons claims

Bright Simons, founder and president of mPedigree, has accused the government of Ghana of using an unorthodox route to ensuring that the falling Ghana Cedi is stable.

In a tweet on August 9, 2022, the social innovator and political commentator said, the Nana Addo Dankwa Akufo-Addo-led government is negotiating a deal with Ghana’s gold mines.

He said such negotiations, according to his sources, is to support Ghana’s falling cedi, he, however, noted that some issues will arise from the move.

“Govt of Ghana is negotiating a deal with the country’s gold mines to buy a portion of output in local currency as a way of supporting the falling currency. 3 obvious issues arise:

“A. Unless the Bank of Ghana (BoG) trades actively, reserves to liquidity will still be an issue.

“B. The large miners have large costs & liabilities in USD limiting the amount of Cedi exposure they are willing to bear.

“C. The small miners seek to avoid additional regulatory scrutiny & the tax spotlight & so hedge in $. Hence why they don’t use the existing PMMC route much,” Bright Simons tweeted.

About Ghana Cedi

Data from the Bank of Ghana put Ghana’s debt at ¢393.4 billion, about 78.3% of Gross Domestic Product as of the end of June 2022.

Out of this, ¢203.4 billion ($28.1 billion) is external debt.

The total debt issuance by the Government increased by 17.6%, from June 2021 to June 2022 compared to a 29.5% increase in total debt issuance between June 2020 and June 2021. This increased debt issuance in combination with elevated global inflation in 2022 has led to increased borrowing costs for the government in both the domestic market and international markets.

In the international markets, issuance of debt and payment of interest has become more expensive due to investor fears over the government’s fiscal position and the depreciation of the Ghana cedi against foreign currencies. Consequently, the government has not been able to issue sovereign bonds in 2022 due to these adverse market conditions.

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