During a forum organized by the Bulk Oil Storage and Transformation (BOST) company in Accra on Wednesday, March 15, Dr. Bawumia expressed his satisfaction with the Gold-for-Oil policy, which he described as the first of its kind in Ghana since independence to address the country’s balance of payment crisis.
According to Dr. Bawumia, this policy is the most significant macroeconomic intervention to tackle the interrelated issues of exchange rate depreciation, fuel prices, food prices, and inflation.
Dr. Bawumia further stated that the Gold-for-Oil policy has led to a significant reduction in fuel prices, from 23 Cedis per liter to approximately 12 Cedis per liter, and has also contributed to exchange rate stability, as anticipated.
He attributed the success of the policy to the efforts of various entities, including the Ministry of Energy, BOST, NPA, Bank of Ghana, Ministry of Lands and Natural Resources, and PMMC, who all played a crucial role in managing the crises of soaring fuel, transportation, and food prices, coupled with a rapidly depreciating currency. Therefore, he expressed his gratitude to them for their contributions.
During the 74th annual new year school of the University of Ghana on Tuesday, January 17, Dr. Bawumia justified the “Gold-for Crude” program, stating that it is an innovative approach to alleviate pressure on the local currency against major trading currencies, particularly the US dollar.
He went on to explain that the program was necessary to address the way Ghana conducts business with its natural resources. For instance, despite Ghana’s history of mining gold for over 200 years, Dr. Bawumia revealed that the country’s total reserves of gold were just 8.7 tonnes at the end of 2021.
Dr. Bawumia highlighted that despite being one of the largest gold mining countries in the world and ranking in the top 10, Ghana has not accumulated enough gold reserves. He noted that Ghana exports gold and imports oil, with the cost of oil imports being approximately $3 billion annually.
Given the constant challenge of finding US dollars to purchase oil, Dr. Bawumia proposed an alternative approach where Ghana would trade its gold for oil and sell the oil in Cedis. The Cedis could then be used to purchase more gold, which would, in turn, pay for the oil, creating a self-sustaining cycle that would not rely on scarce foreign exchange. Dr. Bawumia believed this approach would ultimately prevent currency depreciation.
Dr. Bawumia explained that the gold-for-oil policy was an unconventional approach, not typically found in textbooks. However, he believed that it was necessary to explore new and innovative ideas to address Ghana’s economic challenges. The government negotiated with oil suppliers who were enthusiastic about receiving gold as payment. On Monday, Ghana received its first oil delivery under the gold-for-oil program, marking the successful implementation of this new policy.
The delivery of oil under the gold-for-oil program was a test run to ensure that the framework put in place would function as planned. Dr. Bawumia expressed satisfaction that the test was successful, indicating that the framework would work effectively. He further explained that if the program was implemented on a larger scale, it would significantly reduce the pressure on Ghana’s currency and save a considerable amount of foreign exchange.
Dr Mustapha Abdul-Hamid, the Chief Executive Officer of the National Petroleum Authority (NPA), announced that a shipment of 40,000 metric tons of diesel and 35,000 metric tons of petrol worth $40 million has recently arrived in Ghana and is being discharged.
He further stated that, after consultations with the Association of Oil Marketing Companies (AOMCs), it was decided that only Oil Marketing Companies (OMCs) with at least 45 retail outlets would be eligible to receive the products.
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