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Ghana plans to buy oil with gold instead of dollars | Business and Economy News

by News Desk
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The move is aimed at addressing declining foreign exchange reserves amid rising inflation and a weakening local currency.

Ghana’s government is working on a new policy of buying petroleum products with gold instead of US dollar reserves, Vice President Mahmud Baumia said on Facebook.

The move, announced Thursday, aims to address declining foreign exchange reserves, combined with demand for dollars by oil importers, weakening the domestic cedi and increasing the cost of living.

Ghana’s international reserves stood at around $6.6 billion at the end of September 2022, equivalent to less than three months of imports. That’s down from about $9.7 billion at the end of last year, according to the government.

If implemented as planned in the first quarter of 2023, the new policies will “fundamentally change the balance of payments and significantly mitigate sustained currency depreciation,” Baumia said.

He explained that using gold would prevent exchange rates from directly affecting fuel and utility prices, as domestic sellers would no longer need foreign exchange to import petroleum products.

“The bartering of oil and gold represents a major structural shift,” he added.

The proposed policy is unusual. Countries may also exchange oil for other commodities or commodities, but such transactions usually involve oil-producing countries receiving non-oil commodities.

Ghana produces crude oil but has been dependent on imports for refined petroleum products since an explosion in 2017 shut down its only refinery.

Bawumia’s announcement came as Finance Minister Ken Ofori-Atta announced measures to cut spending and increase revenue to address the worsening debt crisis.

At a presentation of its 2023 budget before parliament on Thursday, Ofoliatta said the West African country was at high risk of a debt crisis and that the depreciation of the Cedi would have a serious impact on Ghana’s ability to manage its public debt. I warned you that

The government is negotiating a bailout with the International Monetary Fund as the cocoa, gold and oil producer faces its worst economic crisis on record.

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