Ghana proposes using gold to pay for oil

Ghana proposes using gold to pay for oil

Debt-stricken African nation orders miners to sell 20% of output to central bank to create new reserve

Ghanaians march in the streets of Accra earlier this month to protest against a worsening economic crisis and to call on President Nana Akufo-Addo to step down. (Reuters Photo)
Ghanaians march in the streets of Accra earlier this month to protest against a worsening economic crisis and to call on President Nana Akufo-Addo to step down. (Reuters Photo)

ACCRA: Ghana has ordered all large mining companies to sell 20% of their stocks of refined gold to the country’s central bank starting from Jan 1.

The move is part of a government plan to use gold to buy oil. The aim is to ease pressure on foreign currency reserves amid demand for dollars by oil importers, which is weakening the cedi, the local currency, and increasing living costs.

“The Bank of Ghana and the Precious Minerals Marketing Company (PMMC) will coordinate with the large scale mining companies to ensure compliance with this directive,” Vice-President Mahamudu Bawumia said on Facebook on Friday.

All community miners and licensed small-scale miners will also have to sell their gold to the government, he said.

“The gold to be purchased by the Bank of Ghana and the PMMC will be in cedis at spot price with no discounts,” he added.

However, Bank of Ghana spokesman Sam Opoku told Reuters he could not confirm or deny whether Bawumia’s order was being considered.

The gold miners Newmont, Gold Fields, AngloGold Ashanti, Galiano Gold and Asante Gold Corp, all of which have mines in the country of 32 million, did not immediately respond to requests for comment.

Ghana’s gross international reserves stood at around $6.6 billion at the end of September 2022, representing less than three months of imports cover. The figure was $9.7 billion at the end of last year, according to the government.

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.

Using gold would prevent the exchange rate from directly affecting fuel or utility prices as domestic sellers would no longer need foreign exchange to import oil products, he said.

“The barter of gold for oil represents a major structural change,” he added.

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.

Finance Minister Ken Ofori-Atta has announced measures to cut spending and boost revenues in a bid to tackle a spiralling debt crisis in the West African nation, saying 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, which has led to street protests.

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