Professor of Finance and economist at the University of Ghana, Godfred Bokpin, has warned that Ghana's gold-driven macroeconomic stability is fragile and could be reversed by a sharp decline in global gold prices. Speaking on Joy FM's Super Morning Show on Monday, August 24, Prof Bokpin sounded the alarm on the country's over-reliance on gold prices.
Fluctuating Gold Prices Pose Threat to Ghana's Economy
Prof Bokpin warned that a 40 per cent decline in gold prices could wipe out the country's reported economic gains within six to eight months. He argued that Ghana had placed too much emphasis on the benefits of the global gold price boom while paying insufficient attention to the environmental destruction caused by irresponsible mining. "The stability we are talking about, the gains that we are talking about, are not durable," he said.
Environmental Destruction a Major Concern
Prof Bokpin also highlighted the need for a comprehensive value-chain assessment of the gold sector that considers not only foreign exchange earnings and reserve accumulation but also the destruction of forests, water bodies, and ecosystems. According to him, Ghana cannot claim to be better off if its economic gains come at the expense of the country's long-term environmental survival. "Any growth model that is heavily reliant on environmental destruction and primary commodities is never sustainable," he said.
Policymakers Must Rethink Gold-Driven Strategy
Prof Bokpin called for policymakers to look beyond short-term macroeconomic indicators and ensure that the environmental and social costs of gold production are properly accounted for when assessing the country's economic performance. He urged rigorous sensitivity analysis and stress testing of Ghana's gold-driven economic strategy to determine how the economy would fare in the event of a major fall in gold prices. This, he believes, is crucial in preventing the country from being caught off guard by fluctuations in global commodity prices.
A Sustainable Growth Model is Key
Ghana's economy has been heavily reliant on gold exports, which has led to significant gains in foreign exchange earnings and reserve accumulation. However, this reliance has also led to environmental destruction and social costs that are yet to be properly addressed. Prof Bokpin's warning serves as a reminder that Ghana's economic growth model must be sustainable and take into account the long-term consequences of its actions.
The government must now take Prof Bokpin's warnings seriously and re-examine its gold-driven economic strategy to ensure that it is sustainable and environmentally friendly. This will require policymakers to think beyond short-term gains and consider the long-term implications of their decisions. The clock is ticking, and it remains to be seen whether Ghana will take the necessary steps to prevent its economy from being ravaged by a decline in gold prices.
Source: Joy Online
