Ghana’s Vice President has announced that the country will take its first consignment of oil under the gold-for-oil policy in January 2023.
“I am happy to announce that the Government of Ghana has concluded the arrangements for the operationalisation of the ‘Gold for Oil’ policy”, Dr Mahamudu Bawumia wrote on Facebook on Thursday, 22 December 2022.
“Consequently, the first oil products under the policy will be delivered next month (January 2023)”.
“My thanks to the Minister for Energy, Minister for Lands and Natural Resources, Governor of the Bank of Ghana, the Chamber of Mines, PMMC and BOST for their leadership in the operationalisation of the Government’s Gold for Oil Policy. God bless our homeland Ghana”, he said.
The government had been working on the new policy to buy oil products with gold rather than US dollar reserves for the past few weeks.
The move, announced earlier by Dr Bawumia, is meant to tackle dwindling foreign currency reserves coupled with demand for dollars by oil importers, which is weakening the local cedi and increasing living costs.
Ghana’s Gross International Reserves stood at around $6.6bn at the end of September 2022, equating to less than three months of imports cover.
That is down from around $9.7bn at the end of last year, according to the government.
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”, Dr Bawumia said a few weeks ago.
Using gold would prevent the exchange rate from directly impacting fuel or utility prices as domestic sellers would no longer need foreign exchange to import oil products, he explained.
“The barter of gold for oil represents a major structural change,” he added.
The proposed policy is uncommon.
While countries sometimes trade oil for other goods or commodities, such deals typically involve an oil-producing nation receiving non-oil goods rather than the opposite.
Ghana produces crude oil, but it has relied on imports for refined oil products since its only refinery shut down after an explosion in 2017.
Dr Bawumia’s announcement was posted as Finance Minister Ken Ofori-Atta announced measures to cut spending and boost revenues in a bid to tackle a spiralling debt crisis.
In a 2023 budget presentation to parliament on Thursday, Mr Ofori-Atta warned that the West African nation was at high risk of debt distress and that the cedi’s depreciation was seriously affecting Ghana’s ability to manage its public debt.