Vice President Mahamudu Bawumia announced on Facebook on Thursday that the government of Ghana is working on a new policy to buy oil products with gold rather than U.S. dollar reserves.
The weakening of the local cedi and rising costs of living are being blamed on the country’s dwindling foreign currency reserves and the demand for dollars by oil importers.
At the end of September 2022, Ghana’s Gross International Reserves were around $6.6 billion, covering less than three months of imports. As reported by the government, this is a decrease from the roughly $9.7 billion seen at year’s end.
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The new policy, which Bawumia claims “will fundamentally change our balance of payments and significantly reduce the persistent depreciation of our currency” if implemented as planned in the first quarter of 2023, has been met with cautious optimism.
He explained that if domestic sellers could use gold to import oil products instead of foreign currency, the exchange rate wouldn’t directly affect fuel or utility prices.
Gold for oil trading, he said, “represents a major structural change.”
The proposal being made is rather unusual. It is more common for an oil-producing country to receive non-oil goods in an oil-for-goods trade than for the reverse to be necessarily the case.
Since an explosion in 2017 shut down the country’s lone refinery, Ghana has had to import refined oil products despite producing crude oil.
Bawumia’s declaration came as Finance Minister Ken Ofori-Atta unveiled plans to reduce government spending and increase government revenue to stem the country’s escalating debt.
On Thursday, Ofori-Atta presented the 2023 budget to parliament and warned that Ghana was in danger of debt distress due to the cedi’s depreciation.
As the cocoa, gold, and oil-producing nation experiences its worst economic crisis in a generation, its government is currently in talks with the International Monetary Fund (IMF) to secure a relief package.
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