Ghana is in talks with company “ENOC”. UAE on a barter deal that will allow the West African country to buy fuel with gold.
Vice President Muhammadu Baumea’s economic adviser Kabiru Mahama said the government had reached an “interim” deal with the UAE oil company.
This comes as Ghana, Africa’s second-largest gold producer, last week ordered big mining companies to sell 20% of the metal it refines to the central bank starting January 1, as it builds up reserves of bullion for use in fuel imports and reduces the demand for dollars. After its currency fell 57% this year, according to “Bloomberg.”
“We are open to all interested international oil companies,” Mahama said in a telephone interview on Friday. He added, “Starting next October, all our needs for petroleum products will be replaced with gold.”
The Ghanaian cedi has been the worst performing currency in the world this year, fueling inflation and depleting the country’s foreign exchange reserves. Meanwhile, the government of President Nana Akufo-Addo, which lost access to international capital markets this year due to spiraling debt-service and borrowing costs, plans to require international bondholders to accept losses on their investments to pave the way for a bailout from the International Monetary Fund.
In turn, the head of financial markets of the Bank of Ghana, Steve Obata, said in an interview on Monday: “ENOC is interested in supplying us with refined oil in exchange for gold.”
He added: “Depending on the amounts they pledge to give us, we will give them the equivalent in gold. This is a government-to-government programme.”
Ghana spends about $10 billion a year on imports, 48% of which is spent on fuel purchases. The government expects the swap of gold for refined crude to help rebuild total international reserves, which fell to $6.7 billion at the end of October, enough to cover just 2.9 months of imports, from 10 $.8 billion from the previous year.
The decline in the currency accelerated inflation to 40.4% in October. This prompted the central bank to raise borrowing costs by 250 basis points to 27%, the highest level in more than 19 years.
Bank of Ghana to buy gold from Sidis mining companies. Ghana began buying gold last year – for the first time in 60 years – to boost its foreign exchange reserves.
“If we implement it according to our vision, it will radically change our balance of payments,” Baumea said in a Facebook post. He stressed that the demand for dollars by oil importers “in the face of declining foreign exchange reserves leads to a decline in the value of the cedi and an increase in the cost of living as fuel prices, transportation and of public services.”
