The move is intended to address dwindling foreign currency reserves as well as demand for dollars by oil importers, which is causing the local cedi to weaken and living costs to rise.
Ghana’s Gross International Reserves were estimated to be around $6.6 billion at the end of September 2022, equivalent to less than three months’ worth of imports. According to the government, this is a decrease from around $9.7 billion at the end of last year.
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.
“The exchange of gold for oil represents a significant structural change,” he added.
The proposed policy is out of the ordinary. While countries occasionally trade oil for other goods or commodities, such transactions usually involve an oil-producing nation receiving non-oil goods rather than the other way around.
Ghana produces crude oil, but it has had to rely on imports for refined oil products since its only refinery closed in 2017 due to an explosion.
Bawumia’s announcement came as Finance Minister Ken Ofori-Atta announced plans to cut spending and increase revenue in order to address the country’s spiralling debt crisis.
In a budget presentation to parliament on Thursday, Ofori-Atta warned that Ghana 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.
As the cocoa, gold, and oil-producing country faces its worst economic crisis in a generation, the government is negotiating a relief package with the International Monetary Fund.
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