S&P Global warns of Ghana’s high reserve-building costs
S&P Global warns that Ghana's strategy to build foreign exchange and gold reserves is creating significant fiscal strain. The agency notes that high costs and central bank losses could hinder economic stability despite recent improvements in inflation.
Why it matters
It highlights the precarious fiscal health of emerging markets attempting to balance national reserve accumulation with domestic economic pressures.
--> Rating agency S&P Global has warned that Ghana’s strategy of simultaneously accumulating foreign exchange reserves and gold requires significant fiscal expenditures and could offset the recent improvement in public finances. As MyJoyOnline reports , spending in the national currency to implement the Ghana Accelerated National Reserves Accumulation Program could amount to between 0.8% and 2.6% of the country’s annual GDP.
According to the agency’s assessment, the gold mining sector is helping Ghana increase its reserves, but the implementation of the GANRAP program is associated with high costs for the state in local currency. The authorities are reforming the regulatory and tax regimes in the gold sector, including moving to a dynamic royalty model with a variable rate, in order to reduce fiscal costs.
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