As government keeps innovating ideas to tackle the perennial depreciation of the local currency against the international trading currencies (especially, US dollar), a negotiation to allow importers use gold to pay for imported petroleum products is ongoing.
The Government believes that, the new policy regime will fundamentally change the country’s balance of payments and significantly reduce the persistent depreciation of the currency with its associated increases in fuel prices.
The vice president in a facebook post had reiterated that, the demand for foreign exchange by oil importers in the face of dwindling foreign exchange reserves results in the depreciation of the cedi and increases in the cost of living with higher prices for fuel, transportation, utilities, etc. To address this challenge, Government is negotiating a new policy regime where our gold (rather than our US dollar reserves) will be used to buy oil products. 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”, Dr Mahmud Bawumia hoped. “This is because the exchange rate (spot or forward) will no longer directly enter the formula for the determination of fuel or utility prices since all the domestic sellers of fuel will no longer need foreign exchange to import oil products.”
The barter of gold for oil represents a major structural change. My thanks to the Ministers for Lands and Natural Resources, Energy, and Finance, Precious Minerals Marketing Company, The Ghana Chamber of Mines and the Governor of the Bank of Ghana for their supportive work on this new policy. We expect this new framework to be fully operational by the end of the first quarter of 2023.
To successfully achieve the target result from the intended policy, the Minister for Lands and Natural Resources, Samuel A. Jinapor has just issued the following directives:
- Effective 1st January, 2023, all large scale mining companies (as agreed with the Bank of Ghana) shall sell twenty percent (20%) of all refined gold at their refineries to the Bank of Ghana (in Ghana Cedis) before the export of the gold. The Bank of Ghana and the Precious Minerals Marketing Company (PMMC) will coordinate with the large scale mining companies to ensure compliance with this directive.
- Effective 1st January, 2023, all Community Mining Schemes (CMS) shall sell their gold outputs to Government through PMMC. All mining licences for CMS shall include a clause mandating licensees to sell their gold output to Government.
- Effective 1st January, 2023, all Licensed Small Scale Gold Miners shall sell their gold to Government through PMMC. All small scale gold mining licences shall include a clause mandating licensees to sell their gold to Government.
- The gold to be purchased by the Bank of Ghana and the PMMC will be in cedis at spot price with no discounts.
These directives would also help local gold refineries obtain gold supplies from PMMC to support their operations as they work toward obtaining the required London Bullion Market (LBMA) certification.