In order to solve the issue of the nation’s depleting foreign exchange reserves, the Ghanaian government has declared that it will start using gold instead of dollars to purchase oil products.
Mahamudu Bawumia, the vice president of Ghana, announced this on Facebook on Thursday. He continued by saying that the choice was made in order to fulfill the increased dollar demand from oil importers, which has caused the local currency to depreciate dramatically and driven up living expenses.
The vice president asserted that the use of gold would stop the price of fuel or utilities from being instantly affected by the exchange rate because domestic vendors would no longer require foreign currency to import oil-related goods.
“Oil importers’ need for foreign currency in the face of depleting foreign exchange reserves leads to a decline in the value of the cedi and rising living expenses due to higher costs for utilities, fuel, and other commodities.
“To address this issue, the government is proposing a new policy framework under which oil goods will be purchased using our gold reserves rather than our US dollar reserves. One of the most significant changes to Ghana’s economic policies since independence is the substitution of sustainably mined gold for oil, according to a portion of the Facebook post.
He explained that if the new policy is implemented, it will significantly lessen the ongoing currency depreciation, which has increased the costs of fuel, power, water, transportation, and food. It will also fundamentally alter the balance of payments.
He explained that if the new policy is put into place, it will fundamentally alter the balance of payments and greatly lessen the ongoing currency depreciation, which has led to increases in the costs of fuel, power, water, transportation, and food.
“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,” he added.
This announcement comes a few weeks after a Blomberg report ranked the country’s currency alongside the Nigerian naira as the world’s two worst-performing currencies, with the naira losing 37 per cent of its value against the dollar and the cedi losing 55 per cent.
In October, the Ghanaian cedi was rated as the worst performing currency in the world after it lost 45.1 percent of its value to the U.S. dollar this year.