The Vice President of the Republic, Dr Mahamudu Bawumia has revealed the government is negotiating a new policy regime where the country’s gold will be used to buy oil products rather than using our dollar reserves.
He stated 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, Government is negotiating a new policy regime where our gold (rather than our US dollar reserves) will be used to buy oil products.”
Dr Bawumia in a post on his Facebook page on Thursday (November 24, 2022) argued that 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” he maintained.
According to the Vice President, the barter of gold for oil represents a major structural change.
He added 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.
Meanwhile, Dr Mahamudu Bawumia said the new policy framework is expected to be operational by the end of the first quarter of 2023.
“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.”
According to the Finance Minister, Ken Ofori-Atta, the Ghana’s Cedi has declined by 53.8% in value against major currencies, since the beginning of 2022,.
Presenting the 2023 Budget in Parliament on Thursday, Mr. Ofori-Atta blamed the demand for foreign exchange as one of the reasons for the decline of the cedi.
“The demand for foreign exchange to support our unbridled demand for imports undermines and weakens the value of the cedi. This contributed to the depreciation of the Cedi which has lost about 53.8% of its value since the beginning of this year, compared to the average 7% annual depreciation of the Cedi between 2017 and 2021.”