The move is aimed at addressing dwindling forex reserves amid rising inflation and a weakening local currency.

The Ghanaian government is working on a new policy of buying oil products with gold instead of US dollar reserves, Vice President Mahamudu Bawumia said on Facebook.

The move, announced Thursday, is designed to address dwindling foreign exchange reserves combined with demand for dollars from oil importers, which weaken local cedi and raise the cost of living.

Ghana’s gross international reserves stood at approximately US$6.6 billion at the end of September 2022, representing less than three months of import coverage. That’s less than about $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 ongoing depreciation of our currency,” Bawumia said.

Using gold would prevent the exchange rate from having a direct impact on fuel or energy prices, as domestic sellers would no longer need foreign exchange to import oil products, he explained.

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

The proposed policy is unusual. While countries sometimes trade oil for other goods or commodities, such deals usually involve an oil-producing nation receiving non-oil goods rather than the opposite.

Ghana produces crude oil, but has relied on imports for refined oil products since its only refinery was shut down after an explosion in 2017.

Bawumia’s announcement was posted as Treasury Secretary Ken Ofori-Atta announced measures to cut spending and boost revenues in a bid to address a spreading debt crisis.

In a presentation of the 2023 budget to parliament on Thursday, Ofori-Atta warned that the West African nation was at high risk of indebtedness and that the depreciation of the cedi was seriously affecting Ghana’s ability to manage its national debt.

The government is negotiating an aid package with the International Monetary Fund as the cocoa, gold and oil-producing nation faces its worst economic crisis in a generation.

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