Ghana Wants to Substitute Dollars With Gold to Pay for Oil Products

Ghana is at present experiencing a severe economic crisis. According to some estimates, servicing the country's debt, which may account for 104 percent of GDP by the end of this year, leaves no funds for social spending. At the same time, the exchange rate of Ghana's national currency is falling, making imported goods prohibitively expensive.

Ghana is developing a policy that will allow it to buy oil with gold, rather than US dollar reserves, said the country’s vice-president Mahamudu Bawumia.

This decision was made in order to strengthen the local currency, the Ghanaian cedi.

Ghana's Gross International Reserves are currently on the decline: they were $9.7Bln at the end of last year but this year they have already decreased by a third and are estimated to be $6.6Bln as of September. The country's current stock of gross international reserves is only enough to cover its imports for less than three months.

The new way of buying oil "will fundamentally change our balance of payments and significantly reduce the persistent depreciation of our currency," Bawumia said.

Bawumia explained that if the country pays in gold instead of dollars, then the exchange rate will not directly affect the cost of fuel and utilities.

Despite the fact that Ghana produces crude oil, it is forced to buy oil products because of the lack of functioning oil refineries in the country. Its only refinery closed in 2017 because of an explosion.

On Thursday, finance minister Ken Ofori-Atta said that Ghana is in a serious debt crisis and the depreciation of the local currency is only making the situation worse.

Ghana is at present negotiating loans with the IMF in exchange for a set of economic recommendations that, according to critics, don't lead to economic stability of IMF's loan recipient country, but rather to the latter's economy being linked to international financial flows.

Since early 2022, Ghana's economy has suffered significantly, plunging the country into a full-fledged economic recession. Inflation increased from 13.9 percent in January to 37.2 percent in September, and some analysts believe the true rate is more than double the official rate - possibly as high as 98 percent. Prices for gasoline and diesel have risen by 88.6 percent and 128.6 percent, respectively. Since January, most public transportation fares have increased by more than 100 percent.

Similarly, water and electricity rates have increased by 27.2 percent and 21.6 percent, respectively, this year. Ghana has the highest food prices in Sub-Saharan Africa, according to the World Bank, with prices increasing by 122 percent since January.

The country has the highest interest rates in Africa, standing at 30 percent, and the highest lending rate, at 35 percent. According to analysts, the Ghanaian cedi is now the world's worst performing currency, and the IMF reduced Ghana's projected growth rate for 2022 from 5.2 percent to 3.2 percent.