The Ghanaian government is working on a new policy of purchasing petroleum products with gold rather than US dollar reserves, Vice President Mahamudu Bawumia said on Facebook.
The move, announced Thursday, is aimed at tackling dwindling foreign exchange reserves coupled with oil importers’ demand for dollars, which weakens the local cedi and raises the cost of living.
Ghana’s gross international reserves stood at around $6.6 billion at the end of September 2022, equivalent to less than three months of import cover. That’s about $9.7 billion at the end of last year, according to the government.
If implemented as planned for the first quarter of 2023, the new policy will “fundamentally change our balance of payments and significantly reduce the persistent depreciation of our currency,” Bawumia said.
Using gold would prevent the exchange rate from having a direct impact on fuel or utility prices, as domestic sellers would no longer need foreign currency to import petroleum products, he said. Explain.
“Bartering gold for oil represents a major structural change,” he added.
The proposed policy is unusual. While countries sometimes exchange oil for other goods or commodities, such transactions usually involve an oil-producing country receiving non-oil goods rather than the other way around.
Ghana produces crude oil, but has relied on imports of refined petroleum products since its only refinery closed after an explosion in 2017.
Bawumia’s announcement came as Finance Minister Ken Ofori-Atta announced measures to cut spending and boost revenue in a bid to tackle a spiraling debt crisis.
During a presentation of the 2023 budget to parliament on Thursday, Ofori-Atta warned that the West African nation was at high risk of debt distress and that the depreciation of the cedi was severely affecting Ghana’s ability to manage its public debt.
The government is negotiating a relief package with the International Monetary Fund as the cocoa, gold and oil producing country faces its worst economic crisis in a generation.
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