The Vice President, Dr Mahamudu Bawumia, has revealed the government’s negotiations to use the country’s gold to import oil products, rather than foreign exchange.
This follows, the recent stance by the Bank of Ghana (BoG) that it has stopped providing foreign exchange (FX) to banks and other financial institutions to fund the importation of rice, poultry, vegetable oils, toothpicks, pasta, fruit juice, bottled water, ceramic tiles and other non-critical goods.
How this will be implemented, given the number of private oil marketing companies operating the country, is not yet out.
In a Facebook post yesterday, the Vice President, said the policy is expected to take effect by the end of the first quarter of 2023 and form parts of effort to address the persistent depreciation of the cedi.
He explained that, once the policy is implemented, “it will fundamentally change our balance of payments and significantly reduce the persistent depreciation of our currency with its associated increases in fuel, electricity, water, transport, and food prices”
“This is because the exchange rate (spot or forward) will no longer directly enter the formula for the determination of fuel or utility prices since all the domestic sellers of fuel will no longer need foreign exchange to import oil products,“ the Vice president said.
“The barter of gold for oil represents a major structural change. My thanks to the Ministers for Lands and Natural Resources, Energy, and Finance, Precious Minerals Marketing Company, and the Governor of the Bank of Ghana for their supportive work on this new policy. We expect this new framework to be fully operational by the end of the first quarter of 2023. God bless our homeland Ghana,” Dr. Bawumia wrote.
Below is what the Vice-President wrote yesterday
The Use of Gold To Buy Imported Oil Products
The demand for foreign exchange by oil importers in the face of dwindling foreign exchange reserves results in the depreciation of the cedi and increases in the cost of living with higher prices for fuel, transportation, utilities, etc.
To address this challenge, the Government is negotiating a new policy regime where our gold (rather than our US dollar reserves) will be used to buy oil products. The barter of sustainably mined gold for oil is one of the most important economic policy changes in Ghana since independence.
If we implement it as envisioned, it will fundamentally change our balance of payments and significantly reduce the persistent depreciation of our currency with its associated increases in fuel, electricity, water, transport, and food prices. This is because the exchange rate (spot or forward) will no longer directly enter the formula for the determination of fuel or utility prices since all the domestic sellers of fuel will no longer need foreign exchange to import oil products.
The barter of gold for oil represents a major structural change. My thanks to the Ministers for Lands and Natural Resources, Energy, and Finance, Precious Minerals Marketing Company, The Ghana Chamber of Mines and the Governor of the Bank of Ghana for their supportive work on this new policy. We expect this new framework to be fully operational by the end of the first quarter of 2023.
God bless our homeland Ghana.
