Cedi Depreciation: Bawumia Announces Plan By Government To Use Gold To Buy Imported Petroleum Products

• Ghana plans to buy imported petroleum products like diesel and petrol with gold to decrease the demand for forex that causes the cedi to depreciate
• The move has been criticised as untenable by some experts in the petroleum and finance sectors
• For instance COPEC-GH has said the best way to reduce pressure on Ghana's forex reserves is to bring TOR back online

Vice president Dr Mahamudu Bawumia has announced plans by the Government of Ghana to pay for imported petroleum products with gold instead of dollars.

The vice president explained in a Facebook post that the move will solve the problem of dwindling foreign exchange reserves that puts pressure on the cedi and fuels depreciation.

“Government is negotiating a new policy regime where our gold (rather than our US dollar reserves) will be used to buy oil products.

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“The barter of sustainably mined gold for oil is one of the most important economic policy changes in Ghana since independence. If we implement it as envisioned, it will fundamentally change our balance of payments and significantly reduce the persistent depreciation of our currency with its associated increases in fuel, electricity, water, transport, and food prices,” the vice president stated.

Govt’s Plan To Buy Imported Petroleum Products With Gold Criticised As Unsound

Meanwhile, the decision by the government has already attracted strong criticisms from some experts in the petroleum and finance sectors.

For instance, Bright Simons, vice president of top think tank IMANI Africa thinks the move is untenable.

In a tweet on Thursday, November 24, he quizzed government about why it will not simply buy dollars with the gold instead of embarking on the gold-for-oil barter.

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“But if you have access to properly sourced gold, why not sell it for dollars & buy oil transparently in an efficient market? Why enter into opaque barter arrangements for a heavily traded commodity like oil? What happened with the bauxite-barter thing last time?” he quizzed.

Also, Executive Director of Chamber of Petroleum Consumers, Ghana (COPEC-GH) Duncan Amoah also think the announcement by the vice president is a joke.

He told YEN.com.gh exclusively that a better way to fight the depreciation of the cedi would be for the government to focus on refining the crude oil mined in Ghana.

“We have more than enough crude oil for our market if our focus is on stabilising the market from external shocks that put pressure on the cedi,” he said.

He wants the government to focus on bringing the Tema Oil Refinery (TOR) back online to refine larger volumes of crude oil produced in Ghana.

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Amoah said that would be a better safeguard against Ghana’s dwindling forex reserves.

"Concert propaganda talk as usual," he described the proposal announced by the vice president.

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Meanwhile, YEN.com.gh reported in a previous story that the finance minister Ken Ofori-Atta said there was no cause for alarm over the cedi's rapid fall against the dollar.

Speaking from Washington DC, the minister said while the cedi's depreciation is perplexing, things will soon get better.

He said the activities of importers in October has appreciated the dollar against the cedi, adding that an IMF deal next year should strengthen the local currency.

Source: YEN.com.gh