The move is aimed at tackling dwindling foreign exchange reserves amid rising inflation and a weakening local currency.
Ghana’s government is working on a new policy to buy oil products with gold instead of US dollar reserves, Vice President Mahmudu Bawumia has said on Facebook.
The move, announced on Thursday, is aimed at tackling dwindling foreign exchange reserves with dollar demand by oil importers weakening the local cedi and increasing living costs.
Ghana’s gross international reserves stood at about $6.6 billion at the end of September 2022, equivalent to less than three months of import cover. According to the government, this is down from around $9.7 billion at the end of last year.
Bawumia said, if implemented as planned for the first quarter of 2023, the new policy would “fundamentally change our balance of payments and reduce the persistent depreciation of our currency”.
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 oil products, he explained.
“The exchange of gold for oil represents a major structural change,” he said.
The proposed policy is unusual. 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, but has been dependent on imports of refined oil products since its only refinery was shut down following an explosion in 2017.
Bawumia’s announcement was posted as Finance Minister Ken Ofori-Atta announced measures to cut spending and boost revenue to tackle the looming debt crisis.
In the presentation of the 2023 budget to parliament on Thursday, Ofori-Atta warned that the West African nation was at high risk of a debt crisis and that the depreciation of the cedi was severely 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.