Associate Professor of Finance at Andrews University, William Kwasi Preprah, has raised concerns about the potential trade-offs in Ghana’s aggressive reserve accumulation policy, cautioning that it could limit funds available for immediate development needs.
Speaking on PM Express on Joy News on Monday, Prof Preprah said he had listened carefully to the Finance Minister’s justification for the shift in economic strategy.
“I listened carefully to the finance minister. He was trying to make the point that the economic management team using that model was not helpful,” he said.
While he does not oppose the new approach outright, he stressed the need for careful consideration.
“The model he’s also proposing to me is okay,” he noted, before highlighting what he considers the central issue — opportunity cost.
“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 said.
Prof Preprah acknowledged gold’s long-term appeal, describing it as an asset that generally appreciates despite periods of volatility.
“We all know gold will appreciate, even though it has high volatility, but it’s on an increasing trend,” he stated.
However, he argued that the policy debate must move beyond price projections and address pressing domestic priorities.
“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?” he questioned.
He called for balance in the approach, particularly regarding the scale of the reserve target.
“If the general worldwide developed economies are doing 10 months, the question is, why are we doing 15? Why are we targeting 15 months?” he asked.
Although he supports reserve accumulation in principle, Prof Preprah suggested that Ghana’s 15-month import cover target may be excessive.
“In principle, I’m not against this policy. 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 argued.
He underscored the urgency of Ghana’s infrastructure and social development needs.
“So many areas need development,” he said.
Citing research, he added that focusing heavily on building reserves can carry measurable economic costs.
“There’s a lot of research that points to the fact that when you focus on building reserves, it has a social cost of about 1% of your GDP,” he explained, describing that figure as significant in Ghana’s context.
He illustrated the point in practical terms, suggesting that such resources could instead be channelled into critical projects, including hospitals and schools in underserved communities.
For Prof Preprah, the key challenge is ensuring that long-term macroeconomic stability does not come at the expense of urgent development priorities.
