The Ghanaian government is working on a new policy where gold rather than US dollar reserves will be used to purchase petroleum products, Vice President Mahamudu Bawumia posted on Facebook.
The move is aimed at tackling dwindling foreign exchange reserves associated with demand for US dollars by oil importers, which weakens the local cedi and increases the cost of living.
Ghana’s gross international reserves stood at around US$6.6 billion (A$9.8 billion) at the end of September 2022, equivalent to less than three months of import cover.
That’s down from a stock position of about $9.7 billion 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,” Bawumia said.
Using gold would prevent the exchange rate from directly affecting fuel or utility prices, as domestic sellers would no longer need foreign currency to import petroleum products, he explained.
“Bartering gold for oil represents a major structural change,” he added.
Bawumia’s announcement came as Finance Minister Ken Ofori-Atta announced measures to cut spending and boost revenue in a bid to tackle a spiraling debt crisis.
During a presentation of the 2023 budget to parliament on Thursday, Ofori-Atta warned that the West African country was at high risk of debt distress and that the depreciation of the cedi was seriously affecting Ghana’s ability to manage its public debt. .
The government is negotiating a relief package with the International Monetary Fund as the cocoa, gold and oil producing country faces its worst economic crisis in a generation.
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