Ghana plans to purchase oil using gold instead of U.S. dollars following weeks of depreciation of the Ghanaian currency, according to a Facebook post by the country’s Vice President, Dr. Mahamadu Bawumia.
Data from the Government of Ghana show the country’s Gross International Reserves stood at around $6.6 billion at the end of September 2022, down from around $9.7 billion at the end of 2021. The international reserves figure also amounts to less than three months of import cover.
In a Facebook post, the Vice President said the move seeks to tackle dwindling foreign currency reserves affected by high demand for dollars by oil importers. He further noted that if the plan is implemented in the first quarter of 2023, the new policy “will fundamentally change our balance of payments and significantly reduce the persistent depreciation of our currency.”
According to him, using gold will no longer directly impact fuel or utility prices since all domestic sellers would no longer need foreign exchange to import oil products. He added that the move, which he calls the ‘barter of gold for oil’, represents a major structural change.
“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,” he said. “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.”
Reuters reports that the move by Ghana is uncommon, adding that such deals typically involve an oil-producing nation receiving non-oil goods rather than the opposite. Ghana is one of the oil-producing countries in the world but largely depends on imported refined cruel.
Ghana is currently negotiating with the International Monetary Fund for a bailout pack of $3 billion. The country is hoping to secure a staff-level agreement by the end of the year.