© REUTERS/Luc Gnago/File PhotoGhana's Vice-President Mahamudu Bawumia is sworn in at the Independence square in Accra, Ghana January 7, 2017.
Ghana's government is working on a new policy to buy oil products with gold rather than U.S. dollar reserves, Vice-President Mahamudu Bawumia said on Facebook on Thursday.
The move is meant to tackle dwindling foreign currency reserves coupled with demand for dollars by oil importers, which is weakening the local cedi and increasing living costs.
Ghana's Gross International Reserves stood at around $6.6 billion at the end of September 2022, equating to less than three months of imports cover. That is down from around $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 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.
Comment: Another reason, or perhaps even the main reason, Ghana is ditching the dollar is because it's clear that it won't be long before it's worthless. In addition, an increasing number of nations, particularly those in Africa, can see that holding up the dollar unnecessarily furthers the destabilizing effect the US has on the world, and the multipolar partners have made it possible and is encouraging nations to trade in other, local currencies and commodities of real value:
Thing is, any banker worth her or his salt, knows that if assets held in reserve are stolen, then a banker no longer will they be because they will have become a common thief deserving nothing but disdain.