Ghana mulls buying oil with gold instead of dollar

Ghana's government is preparing to buy oil products with gold rather than US dollar reserves_ Vice-President Mahamudu Bawumia said.

The move is meant to tackle dwindling foreign currency reserves coupled with demand for dollars by oil importers_ which is weakening the Ghanaian cedi and increasing living costs_ reports Reuters.

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 2021_ according to the government.

If implemented as planned for the first quarter of the next year_ 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 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.

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 spiraling debt crisis.

In a 2023 budget presentation to parliament on Thursday_ Ofori-Atta warned 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.

The government is negotiating a relief package with the International Monetary Fund as the cocoa_ gold and oil-producing nation faces its worst economic crisis in a generation.