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GHANA- The country plans to pay in gold bars for its fuel purchases to preserve its foreign exchange reserves

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The new measure, expected to come into effect in the first quarter of 2023, aims to halt the decline in foreign reserves and the depreciation of the national currency.

Ghana plans to pay for its purchases of refined petroleum products in gold bars rather than in US dollars, in order to combat the deterioration of its foreign exchange reserves, announced Ghanaian Vice-President Mahamudu Bawumia on Thursday, November 24.
“The government is preparing a new policy whereby our gold rather than our U.S. dollar reserves will be used to buy petroleum products,” he wrote on his official Facebook page.

Mr. Bawumia also announced that this new payment method should reduce the depreciation of Ghanaian cedi and inflationary pressures. The barter of sustainably mined gold for oil is one of the most significant economic policy changes in Ghana since independence. If we implement it as planned, it will fundamentally change our balance of payments and significantly reduce the persistent depreciation of our currency and the associated increases in fuel, electricity, water, Transport and other products,’ he said.

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Ghana’s foreign exchange reserves stood at about $6.6 billion at the end of September 2022, a level that covers less than three months of imports. At the end of 2021, these reserves were in the order of $9.7 billion.

Ghana, which produces crude oil, has been importing all of its refined petroleum product requirements since the closure of its only refinery in 2017 following the explosion of a distillation unit.

The announcement of the use of gold to pay for oil imports comes as the Ghanaian government has announced measures to reduce public spending and increase revenues in an effort to alleviate the debt crisis the country.

In July, Ghana began negotiations with the International Monetary Fund (IMF) to obtain financial support to restore the country’s public finances. However, the multilateral financial institution had estimated that Ghana’s debt, amounting to 393.4 billion cedis ($38 billion), was not sustainable, and called on the authorities to restructure this debt in order to benefit from an aid programme.

Source : Agence Ecofin

       

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