Dr. Mahamudu Bawumia, Ghana’s Vice-President, claimed that certain analysts and commentators had erroneously understood Ghana’s stated strategy of utilizing its gold reserves to pay for oil as an effort by Ghana to abandon the use of the US dollar in international trade.
Speaking at the 2022 AGI Awards in Accra, Dr. Bawumia pointed out that Ghana’s gold for oil initiative, on the other hand, will allow Ghana the opportunity to build up additional foreign reserves as the nation will be able to save the $3 billion it currently spends on oil imports. In addition, he said that in light of diminishing foreign exchange reserves, gold was being used exclusively for imports of oil.
Sadly, some individuals have misunderstood this to mean that Ghana is opposed to using the US currency in international dealings. Not at all. In the future, we intend to build up more US dollar reserves, the vice president said.
Vice President Bawumia noted that the need for foreign exchange to finance our import of oil products has been a significant factor in the depreciation of the cedi. To address this issue, he said, the government is negotiating a new policy regime under which sustainably mined gold will be used to purchase oil products.
If we implement the gold for oil strategy as intended, it will fundamentally alter our balance of payments and greatly lessen the ongoing devaluation of our currency, which is responsible for increases in the costs of fuel, power, water, transportation, and food.
This, he added, is because none of the domestic fuel dealers will any longer require foreign exchange to import oil goods, therefore the exchange rate (spot or forward) will no longer directly enter the formula for determining gasoline or utility pricing.