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Ghana plans to buy oil with gold instead of U.S. dollars

Economy Nov 24, 2022 02:00PM ET
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© Reuters. FILE PHOTO: Ghana's Vice-President Mahamudu Bawumia is sworn in at the Independence square in Accra, Ghana January 7, 2017. REUTERS/Luc Gnago/File Photo
 
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ACCRA (Reuters) -Ghana's government is working on a new policy to buy oil products with gold rather than U.S. dollar reserves, Vice-President Mahamudu Bawumia said on Facebook (NASDAQ:META) on Thursday.

The move is meant to tackle dwindling foreign currency reserves coupled with demand for dollars by oil importers, which is weakening the local cedi and increasing living costs.

Ghana's Gross International Reserves stood at around $6.6 billion at the end of September 2022, equating to less than three months of imports cover. That is down from around $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 persistent depreciation of our currency," Bawumia said.

Using gold would prevent the exchange rate from directly impacting fuel or utility prices as domestic sellers would no longer need foreign exchange to import oil products, he explained.

"The barter of gold for oil represents a major structural change," he added.

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

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

Bawumia's announcement was posted as Finance Minister Ken Ofori-Atta announced measures to cut spending and boost revenues in a bid to tackle a spiraling debt crisis.

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

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

Ghana plans to buy oil with gold instead of U.S. dollars
 

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Comments (10)
Merideth Cohen
Merideth Cohen Nov 24, 2022 11:29PM ET
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What would happen if China, the EU, Japan, and India followed this trend?
Jason Switzer
Jason Switzer Nov 24, 2022 11:29PM ET
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america would crumble probably
PnJ Leiva
PnJ Leiva Nov 24, 2022 8:19PM ET
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Smart move. Keep the USD and sell the asset that keeps losing value even after going through highest inflation in 40 plus years.
Walter Oney
Walter Oney Nov 24, 2022 6:19PM ET
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He is gonna get ducked soon
Phil Ht
Phil Ht Nov 24, 2022 5:29PM ET
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The attack on the petrodollars persists.
Rubbing Hands
Rubbing Hands Nov 24, 2022 3:17PM ET
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why don't they trade oil for refined products? Then both parties get something they can use without conversion.
vince smith
vince smith Nov 24, 2022 3:17PM ET
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Because the Americans won't get their cut.
Phil Ht
Phil Ht Nov 24, 2022 3:17PM ET
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The petro dollar is the main source of US global dominence. Part of the reason for rate hikes. They adminisrstion will go to any length to protect this.
vince smith
vince smith Nov 24, 2022 3:14PM ET
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There will be a coup d'etat in that country very soon backed by the Americans
Marc Hainey
Marc Hainey Nov 24, 2022 3:05PM ET
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Ghana is in the need of some democracy.
vince smith
vince smith Nov 24, 2022 3:05PM ET
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hahahaha hilarious
Peter Murton
Peter Murton Nov 24, 2022 3:05PM ET
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And freedom!!
Flat Top
Flat Top Nov 24, 2022 2:49PM ET
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This guy is asking for trouble.
syedarshadullah hussaini
syedarshadullah hussaini Nov 24, 2022 2:19PM ET
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it directly challenging the supremacy of America to use dollar as weapon to de stabilise countries, remember Gaddafi of Libya,he tried something like this and Libya was destroyed on some pretext.
Dave Jones
Dave Jones Nov 24, 2022 2:06PM ET
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Probably more reliable than bitcoin....
 
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