By Enyichukwu Enemanna
Ghana’s Vice-president, Mahamudu Bawumia has announced that his country will in the first quarter of 2023 commence payment for oil products with gold locally produced and processed in the country as against the dollar.
In a Facebook post on Thursday, Bawumia said the policy seeks to tackle dwindling foreign currency reserves coupled with demand for dollars by oil importers, which is weakening the local cedi and increasing living costs.
If implemented as planned, the new policy “will fundamentally change our balance of payments and significantly reduce the persistent depreciation of our currency,” Bawumia said.
Ghana’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.
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 Vice President explained.
“The barter of gold for oil represents a major structural change,” he added.
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.
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.
Bawumia’s announcement was posted as Finance Minister Ken Ofori-Atta announced measures to cut spending and boost revenues in a bid to tackle a spiraling debt crisis.
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.
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.
