The title of a Ghanaweb article is “GoldBod admits to illegally transacting gold with ‘black market’ dollar rate.” Is the GoldBod trading illegally? The answer is No.
Sammy Gyamfi: “… due to lack of permanent market regulatory systems, the GoldBod was in the last 2 weeks of June 2025, compelled to raise its buying rate to “black market” levels. This was to deal with extreme competition from smugglers and hoarders …. As expected, Smugglers and hoarders are fighting back by offering higher prices for gold at black market rates in the local market.
Through intensified market regulation and enforcement, we have succeeded in bringing the situation under control, hence our decision this month (July) to bring back the local burying rate to interbank levels.(https://x.com/SammyGyamfi_/status/1940688795155800337)
There are two ways (not mutually exclusive) of dealing with smuggling: (a) enforcement: using the police, soldiers, immigration officials, etc to prevent smuggling, and (b) giving producers a better (higher) price to reduce their incentive to smuggle. For example, if Cocobod wants to reduce the incentive of farmers to smuggle cocoa to Cote d’Ivoire, it has to pay a price that is as close as possible to the price (legal or illegal) of cocoa in Cote d’Ivoire.
Enforcement is imperfect and costly. The more effective (but more costly) is enforcement, the lower is the price that the government can offer producers. This is because more effective enforcement gives gold producers a worse outside option. Thus, there is a trade-off: better enforcement is costly but comes with a benefit (a lower price by the government). The higher the price, the fewer resources the government has to invest in enforcement.
The price of cocoa in Cote d’Ivoire is similar to the black market exchange rate at which the producers of gold illegally sell their gold to smugglers. By buying gold at an exchange rate that is as close as possible to black market rate, the GoldBod buys gold at a higher price but invests fewer resources in enforcement (i.e., using force to prevent smuggling). It is important to note trading at the black-market rate in the official market (i.e., gold producers sell to the GoldBod at black-market rate) is not the same as trading in the black market.
Goldbod is not trading in the black market. It is still trading in the official (legal) market. When Ghana had a fixed exchange rate regime in the 1970s until the mid-1980s, the cedi was periodically devalued because it was overvalued (too low relative to the black market rate). That was not illegal.
In general, we should have the flexibility of using different exchange rates to solve different problems. This is why I am against the IMF’s requirement of a unified exchange rate.
The IMF and multiple exchange rates
According to paragraph 36 of the IMF Country Report No. 23/168 (dated May 2023) which was prepared as part of the IMF’s three-year Extended Credit Facility (2023 to 2026) for Ghana:
“At times, the Bank of Ghana (BoG) has provided forex (FX) support at rates other than those prevailing in the market, leading to the emergence of multiple exchange rates. Going forward the BoG will ensure its FX liquidity is provided at prevailing market exchange rates and implement measures to further support unifying the exchange rates. In this respect, staff welcomes the authorities’ commitment not to introduce measures that give rise to Multiple Currency Practices (MCPs).
To support price discovery and efficient allocation, the BoG will employ auctions as the primary channel for any FX intervention. Any bilateral trades will be conducted at the market rate. The BoG will gradually phase out the special FX auctions for fuel distributors introduced in March 2022 …”
Paragraph 64 also says that “The BoG’s commitments to unify the exchange rates, provide FX liquidity at the market rates, and not introduce any actions that give rise to multiple currency practices (MCPs) are welcome.”
Thus, the IMF is against different exchange rates. But this is not based on any compelling economic logic. The existence of multiple exchange rates (interbank, forex bureau, BoG rates, etc) is not a problem. There are different prices in markets for the same or similar goods as a result of different search costs for consumers, ill-informed consumers, different incomes of consumers, different age groups, different purposes, etc. For example, there are different prices for petrol at different locations by different companies.
In 1971, France adopted a dual exchange rate system. After that, in 1973, Italy also adopted this system. Both countries maintained these dual exchange rate systems through the early 1970s. The Belgium–Luxembourg Economic Union has been using this system since 1957.
As stated above, the IMF’s position against multiple exchange rates is not based on any convincing economic argument. Besides, the BoG does not directly manipulate the exchange rate. In its forex auction, it makes a given amount of dollars available. Then the authorized dealers (usually banks) bid for the dollars by stating the amount of dollars they want and the price at which they want to buy a dollar. An exchange rate is then determined based on the bids of the buyers. That is how a market should operate.
In Ghana, the IMF recommendation against multiple exchange rates, particularly the “non-market” rates used by the Bank of Ghana stems from the IMF’s concerns about rent- seeking and patronage in the allocation of forex. That is, the fear that the Bank of Ghana will allocate forex to people who will buy at cheaper rates and resell them at higher rates for purposes for which they were not intended or be sold to cronies who would benefit from subsidized rates.
This is reminiscent of the cronyism under import licensing in the 1960s and 1970s, where a small group of lobbyists and politically-connected people got import licenses and bought scarce forex (dollars) from the central bank in some countries, including Ghana, at a very cheap price. This rent-seeking behavior in India and Turkey in the 1960s and 1970s was what motivated Anne Kruger to write her seminal paper titled “The political economy of the rent-seeking society”, which was published in the American Economic Review in 1974. This is also why the IMF wants the Bank of Ghana to phase out the special forex auctions for fuel distributors introduced in March 2022.
A similar concern is the basis of the recommendation by Dr Kwabena Donkor, a former minister of power, that the policy of subsidized premix fuel for fisherman should be abolished because rent-seekers and middlemen (vested interests) buy the fuel at the subsidized price and resell it at a higher price to people who are not fishermen. In an interview granted in May 2025, Dr Donkor reportedly said that, “The premix meant to go to fishermen and boat operators gets diverted in Accra and Tema, and it goes into adulteration of petrol.
They just dump it into petrol dumps to increase the quantum because of the price differential. For example, if the subsidised premix is 5.35 cedis per litre…. If you go to the Goil fuelling station today, a litre of petrol is 13.27 cedis. So, look at the huge price differential. And, so there is the opportunity for people to divert premix meant for fishermen into pumps, into tanks for customers to buy. So, they make a super profit.”
Dr Donkor also cited another case which occurred in 1999/2000:
“We had the same issue with kerosene. I remember 1999, 2000, again, at that time, I was the chief executive of BOST, and BOST was the quasi-regulator. And, so I was handling the fixing of petroleum prices. There was a good subsidy on kerosene in those days. The intent of the state was that since kerosene was used largely by rural folk and the urban poor, or peri-urban, it should be subsidized to make life easier.
However, the same kerosene, the flashpoint of kerosene is quite close to what we call diesel, gas oil, or automotive gas oil. And, so we’ll find kerosene, instead of going to Yeji, instead of going to Nkwanta, instead of going to Pandai, instead of going to Bunkurugu, the kerosene found its way into gas oil in Accra, Tema, Ashaiman area. Away from the areas that really need it. They were using that to dilute the quality of gas oil because of the price differential, because it was priced lower.”
If the BoG sells the dollar to cronies who use it for activities for which the dollars were not intended, then the IMF’s recommendation is sensible. We should not be bogged down by the IMF’s fears. This is why we should manage our affairs well, be fiscally responsible, and not rely on the IMF. The BoG’s scarce dollars must be allocated efficiently. Why should importers of wine, apples, luxury cars, wigs, alcohol, etc have the same access to the BoG’s dollars as importers of fuel that is necessary for the provision of electricity?
Importers of oil, gas, equipment, building materials, medicine, and other essential (goods) imports should be the BoG’s focus. Those who want dollars for sugary products, wine, champagne, apples, to pay the school fees of their children abroad, and consume other good “nonessential” goods should buy at a higher rate from forex bureaus and commercial banks (not the forex they get as bidders in the BoG forex auction).
Given our diverse problems, multiple exchange rates make sense.
Reference: Marion, Nancy P. (1994). “Dual Exchange Rates in Europe and Latin America”. The World Bank Economic Review 8 (2): 213–224.
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Author: J. Atsu Amegashie
