Fitch Warns Gold Price Decline Could Threaten Ghana’s Reserve Stability and Economic Gains

Fitch Solutions has issued a cautionary outlook on Ghana’s economic stability, warning that a sharp downturn in global gold prices could significantly erode the country’s international reserves and undermine recent gains in inflation control and currency stability.

In its latest country risk analysis, the UK-based research firm outlines a potential scenario in which the normalization of global trade dynamics, particularly under a more conventional U.S. trade regime or the resolution of major geopolitical tensions, could drag gold prices downward. This, it warns, would have swift and serious consequences for Ghana’s macroeconomic outlook.

“This would keep inflation elevated, lead to a weakening in consumer and investor sentiment and prompt the central bank to keep interest rates higher for longer”, Fitch noted.

Ghana, a major gold exporter, has benefited from elevated global gold prices in recent quarters, helping the country rebuild international reserves, stabilize the cedi, and ease inflationary pressures. However, Fitch notes that this tailwind is fragile.

A fall in gold prices would “quickly erode Ghana’s international reserves,” Fitch cautioned, creating renewed volatility in the cedi. Such a shock, it says, would likely force the Bank of Ghana into maintaining high interest rates for an extended period in a bid to stabilize inflation and the local currency.

Conversely, Fitch’s upside scenario offers a more optimistic trajectory, should the cedi continue to appreciate, possibly supported by strong gold prices, Ghana could see inflation fall faster than previously projected. This would provide room for the Bank of Ghana to ease monetary policy more quickly, stimulating lending and boosting private consumption.

Consumption Dynamics in 2025

The report projects contrasting trends in consumption. Government consumption is expected to contract as fiscal authorities pursue expenditure rationalization under the ongoing IMF program.

“The contribution of government consumption will be negative in 2025,” Fitch notes, reflecting a deliberate move towards fiscal discipline.

On the other hand, private consumption could receive a boost if the cedi holds strong and inflation continues to ease. A firm currency would reduce import costs, lower household spending pressures, and support real incomes, paving the way for a gradual rebound in domestic demand.

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