Associate Professor of Finance at Andrews University in the United States, Prof William Kwasi Preprah, has questioned whether Ghana’s aggressive reserve policy risks locking up funds needed for immediate development.
Speaking on Joy News’ PM Express on Monday, he said he had listened closely to the Finance Minister’s justification for the shift in strategy.
“I listen carefully to the finance minister. He was trying to make the point that the economic management team using that model was not helpful.”
While he does not reject the new approach outright, he believes it must be carefully weighed. “The model he’s also proposing to me is okay.”
But he quickly raised the central concern. “The fact is that the opportunity cost of you using your money to focus on development, but tying it down in reserves of gold.”
He acknowledged that gold has long-term appeal.
“We all know gold will price to appreciate, even though it has high volatility, but it’s on an increasing trend.”
Yet he insists the debate must go beyond price trends. “But let’s ask ourselves, how much are we prepared to sacrifice in terms of development, using current funds for current development to save for the future?”
For Prof Preprah, balance is key. “We should probably have a balance.”
He questioned the scale of the target being pursued.
“If the general worldwide developed economies are doing 10 months, the question is, why are we doing 15? Why are we targeting 15 months?”
In principle, he supports reserve accumulation. “In principle, I’m not against this, this policy.”
However, he believes the 15-month target may be excessive.
“But the 15 months is where I see that we could probably be better off using the five months of whatever funds you will get to support our current development.”
He stressed the urgency of Ghana’s domestic needs. “So many, so many, many, many, many areas need development.”
Beyond theory, he pointed to research on the broader economic impact.
“And there’s a lot of research that points to this fact that when you focus on building reserves, it has a social cost of about 1% of your GDP.”
In Ghana’s case, he described that cost as significant. “And looking at Ghana, that 1% amount opportunity cost is very significant.”
He made it personal. “It could be able to build a hospital or school in my hometown and other places.”
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