• • In financial economics, all concepts related to keeping reserves are based on the simple idea that ample foreign‐currency reserves serve as a self-insurance buffer, allowing a country to weather external shocks and keep its currency and economy stable.

• • If you read Keynesian concepts like the “Buffer Stock theory on reserves” the common factor is that reserves act like a stockpile of grain which must be built up in good times and used during bad times. The keyword is to use it during “Bad Times”

• • To the best of my knowledge, there is no established economic theory or principle that advises a central bank to accumulate foreign reserves at the expense of addressing a severe economic downturn. On the contrary, sound macroeconomic management calls for the strategic use of reserves to cushion the economy during periods of external shocks, currency volatility, or inflationary pressure.

• • India used over $60 billion in 2022 and an additional $4–7 billion in a single day in early 2025. Turkey injected more than $27 billion by mid-2023 and around $10 billion in March 2025. Japan intervened with about $50–55 billion in 2022 and $62.2 billion in 2024.

• • South Korea sold approximately $37.75 billion in 2022 and $6 billion in April 2024. Brazil intervened with more than $30 billion in December 2024. Indonesia used over $1.4 billion in 2022 and resumed large interventions in 2025.

• • Kazakhstan spent over $1 billion in late 2024 and planned to spend up to $1.4 billion more. Even China intervened in the forex market this year of 2025 through major state bank dollar sales (exact amount undisclosed). Check for more data – https://www.reuters.com/…/india-central-bank-prepared…/n

• • The big question here is, do all interventions lead to the restoration of economic balance or stability? The clear and unequivocal answer is absolutely No. Forex Interventions is not as simple as injecting dollars into the economy without backing it with sound fiscal management, structural reforms, and policy credibility. It will fail miserably!!!

• • In Turkey, for instance over $128 billion in reserves was used between 2019 and 2021 to defend their current (lira), yet the currency rather collapsed and inflation soared above 85% in 2022. Argentina’s central bank spent approximately 2025, $619 million in the first half of January 2025 to contain the widening exchange-rate gap, yet the Argentine peso continued to lose value, with inflation remaining well above 100%. Between February and August 2022, the Central Bank of Egypt used approximately USD 8 billion in reserves to defend the Egyptian pound, however, intervention rather contributed to a devaluation by over 50%, with a surge in inflation.

• • In the case of Ghana, the Bank of Ghana between 2022 and early 2023, sold over $1.8 billion in FX from its reserves aiming at stabilizing the cedi and easing the soaring inflation. Despite these efforts, the Ghanaian cedi became the world’s worst-performing currency in 2022, depreciating by over 54% against the U.S. dollar. Inflation rose sharply, peaking at 54.1% in December 2022, while gross international reserves dropped from $9.7 billion in 2021 to about $6.2 billion by the end of 2022. This is what led to seeking a $3 billion IMF bailout

• • For the first time in Ghana’s recent economic history, the Central Bank’s foreign exchange intervention has yielded remarkably positive results across key macroeconomic indicators. The cedi has appreciated significantly, registering gains against all major trading currencies including strong performance against the Chinese yuan, Ghana’s top import partner, and the UAE dirham, our major export partner. Simultaneously, interest rates have shown a consistent downward movement, and inflation has declined sharply. So, what did the Bank of Ghana get right? Clearly, this was not merely about injecting $1.2 billion into the market.

So, in conclusion, what is the story here?

Simply, reserves are not meant to be hoarded, but must be deployed wisely to defend credibility, anchor expectations, and support real sector recovery. When interventions are timely, targeted, and backed by credible reforms, they act as a powerful tool.

Tell me what you think???

The writer is a Senior Research Lead and Financial Economist 

Email: Nknkrumah.phd@gmail.com  Tel: +233(0) 24 393 2107