In
light of growing inflation and a depreciating local currency, the action is
intended to address decreasing foreign exchange reserves.
According
to Vice President Mahamudu Bawumia's Facebook post, Ghana's government is
developing a new plan to purchase oil goods using gold rather than US dollar
reserves.
The
decision, which was made public on Thursday, aims to address the country's
declining foreign exchange holdings as well as the rising demand for dollars
from oil importers, both of which are weakening the local cedi and driving up
living expenses.
At
the end of September 2022, Ghana's gross international reserves were estimated
to be around $6.6 billion, or less than three months' worth of imports.
According to the government, that is less than the $9.7 billion it was at the
end of the previous year.
The
new policy "would radically affect our balance of payments and greatly
minimize the chronic depreciation of our currency," according to Bawumia,
assuming it is implemented as scheduled for the first quarter of 2023.
Because
domestic vendors would no longer require foreign exchange to import oil
products, using gold would prevent the exchange rate from having a direct
impact on the cost of fuel or utilities, he said.
He
continued, "The exchange of gold for oil constitutes a significant
structural transformation.
It
is unusual to have the proposed policy. Oil is occasionally exchanged for other
commodities or goods, although in these transactions, the receiving country is
usually a country that produces non-oil goods rather than the other way around.
Ghana
produces crude oil, but since its sole refinery was forced to close due to an
explosion in 2017, the country has had to import refined oil products.
As
Ken Ofori-Atta, the finance minister, unveiled plans to reduce expenditure and
increase taxes in an effort to stem the tide of mounting debt, Bawumia posted
his declaration.
Ofori-Atta
cautioned that Ghana was very susceptible to financial distress and that the
depreciation of the cedi was adversely affecting Ghana's capacity to manage its
public debt in a presentation of the 2023 budget to parliament on Thursday.
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