Ghana’s government is mulling on a new system to trade oil products for gold instead of US dollar reserves, Vice President Mahamudu Bawumia stated on Facebook.
The government intends to fight diminishing foreign currency reserves in addition to demand for dollars by oil importers, which together is lowering the local cedi and increasing living costs.
Vice President Bawumia said, “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.”
Using gold would solve the issue of the negative impact of the exchange rate on fuel or utility prices as domestic sellers would not depend on foreign exchange to import oil products, explained Bawumia.
He said, “The barter of gold for oil represents a major structural change.”
The proposed policy is unusual as countries in some instances export oil and import other goods or commodities, and these deals usually involve an oil-producing country importing non-oil goods and not the opposite.
Whereas, Ghana manufactures crude oil, but has been depended on imports for refined oil products ever since its sole refinery shut down due to an explosion in 2017.
Bawumia’s announcement came in the wake of Finance Minister Ken Ofori-Atta’s announcement regarding cutting spending and boosting revenues to deal with a increasing debt crisis.
During a 2023 budget presentation to parliament on Thursday, Ofori-Atta cautioned that the West African nation was vulnerable of debt distress and that the cedi’s decline was worsening Ghana’s ability to manage its public debt.
The nation that produces cocoa, gold, and oil is experiencing its worst economic crisis in a generation, and the government is currently negotiating a bailout package with the International Monetary Fund.
