The government of Ghana is working on implementing a new policy to purchase oil products with gold instead of U.S. dollar reserves.
Mahamudu Bawumia, Ghana’s vice-president said on Facebook that the new policy is aiming to tackle dwindling foreign currency reserves amid demand for dollars from oil importers that weakens local cedi and increases cost of living.
According to the vice president, the new policy will fundamentally change the balance of payments and significantly reduce the persistent depreciation of Ghana if implemented as planned in the first quarter of 2023.
The use of gold will prevent the exchange rate from directly impacting fuel or utility prices, in which domestic sellers would not require foreign exchange to import oil products.
Even though Ghana can produce oil, it has to rely on importing refined oil products after the explosion and shutdown of its only refinery since 2017.
Ken Ofori-Atta, the Finance Minister, announced plans to cut spending and boost revenue in a bid to tackle a rising debt crisis. In the budget presentation to parliament in 2023, he warned the West African nation was at high risk of debt distress and that the depreciation of cedi had a serious impact on the ability to manage public debt.