In Ghana, government is working on a new policy to buy oil products with gold rather than U.S. dollar reserves. This is according to Vice President, Mahamudu Bawumia on a Facebook post on Thursday, November 24, 2022.
The move is meant to tackle dwindling foreign currency reserves coupled with demand for dollars by oil importers, which is weakening the local cedi and increasing costs of living in the country.
The country’s Gross International Reserves stood at around $6.6 billion at the end of September 2022, equating to less than three months of imports cover. That is down from around $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 on Facebook. He further explained that using gold would prevent the exchange rate from directly impacting fuel or utility prices as domestic sellers would no longer need foreign exchange to import oil products. "The barter of gold for oil represents a major structural change," he added.
Observers are of the view that the proposed policy is uncommon. While countries sometimes trade oil for other goods or commodities, such deals typically involve an oil-producing nation receiving non-oil goods rather than the opposite.
Ghana produces crude oil but it has relied on imports for refined oil products since its only refinery shut down after an explosion in 2017.
Vice President Bawumia who is the head of the Economic Management Team of the country made this announcement as the Finance Minister, Ken Ofori-Atta announced measures to cut spending and boost revenues in a bid to tackle a spiraling debt crisis. Which is gradually running the West Africa country to a halt.
In a 2023 budget presentation to parliament on Thursday, Ofori-Atta warned the West African nation was at high risk of debt distress and that the cedi's depreciation was seriously affecting Ghana's ability to manage its public debt.
Currently, the government is negotiating a relief package with the International Monetary Fund as the cocoa, gold and oil-producing nation faces its worst economic crisis in a generation.
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