Ghana plans to buy oil with gold instead of dollar reserves

Ghana is developing a new strategy that would allow it to buy oil products using gold instead of US dollar reserves.

Vice President Mahamudu Bawumia revealed this through Facebook Thursday.

He explained that the decision is intended to address Ghana’s declining foreign exchange reserves and oil importers’ demand for dollars, a situation that has severely weakened the local cedi and raised living expenses.

Gold to the rescue: The vice president said that since domestic suppliers would no longer need foreign currency to import petroleum products, the use of gold would prevent the exchange rate from directly impacting the cost of fuel or utilities.

  • “The demand for foreign exchange by oil importers in the face of declining foreign exchange reserves results in the depreciation of the cedi and increases in the cost of living with higher prices for fuel, transportation, public services, etc. .”
  • “To meet this challenge, the Government is negotiating a new political regime in which our gold (instead of our US dollar reserves) will be used to buy petroleum products. The exchange of sustainably mined gold for oil is one of the most significant economic policy shifts in Ghana since its independence.
  • “If we implement it as planned, it will fundamentally change our balance of payments and significantly reduce the persistent depreciation of our currency with associated increases in fuel, electricity, water, transportation and food prices. This is because the exchange rate (spot or forward) will no longer enter directly into the formula for determining the prices of fuels or public services, since all national sellers of fuels will no longer need foreign currency to import petroleum products”. He explained.

What you should know:

The news continues after this announcement.

As of the end of September 2022, Ghana’s gross international reserves were estimated at around $6.6 billion, or less than three months’ worth of imports. According to the government, that’s a decrease from the $9.7 billion it was at the end of the previous year.

Ghana produces crude oil, but since its only refinery was forced to close due to an explosion in 2017, it has relied on imports of refined petroleum products.

The news continues after this announcement.

Ofori-Atta warned Ghana’s parliament during the presentation of the 2023 budget that the West African country faced a high risk of debt distress and that the depreciation of the cedi was negatively affecting Ghana’s ability to manage its public debt.

The cocoa, gold and oil-producing nation is experiencing its worst economic crisis in a generation, and the government is currently negotiating an aid package with the International Monetary Fund.

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