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  • Revise the current modalities for the Debt Exchange Program – Economist advise gov’t

    Revise the current modalities for the Debt Exchange Program – Economist advise gov’t

    Adnan Adams Mohammed

    An economist has called on the manager of the economy to revise the modalities of the entire exercise of Domestic Debt Exchange Program (DDEP).

    The Honorary Fellow at Solidare Ghana believes that, since the bank and non-bank sector stability plays a major role in a non-market economy like Ghana, the government is advised to stress-test all these sectors before any debt exchange program.

    The economist explained that, the stress test will provide information on how to design the needed support for the sector. Indicating further that, the financial stability support fund provided in the first and the revised DDEP is not enough, some of the institutions may need recapitalization, liquidity support, and in large regulatory measures.

    “The government’s posture in the Domestic Debt Exchange Program (DDEP) exercise seems not to be serious”, Professor Lord Mensah, a lecturer at the University of Ghana Business School indicated in his expectations for 2023. “The entire exercise can pose a unique challenge, dragging the IMF Board approval and external debt restructuring into the last quarter of 2023 to the first quarter of 2024.”

    Prof Mensah stressed that, “There seems to be no appreciation of the consequence of the entire DDEP on the domestic financial sector.”

    Consequently, he provided education on the effect between the DDEP and the financial sector. “The government should note that Banks and the Non-Bank (including pensions, rural banks, and insurance companies) sectors hold more than 84% of the domestic debt, and as a result, careless execution of the DDEP may spread the country’s debt distress to other parts of the economy, with likely effects on the financial stability and economic activity.

    “The structure of the DDEP will play a major role in achieving the necessary fiscal space whiles minimizing the risk to the domestic financial system and the broader economy. The government must sacrifice and cast its net wide to ensure borrower-creditor participation in the DDEP by lowering the relief it is seeking from the creditors.”

    Meanwhile, moving from the above analysis on the DDEP, the economist expects the “macroeconomic indicators like the exchange rate (Cedis to the Dollar) and inflation to see some stability compared to last year, due to the fall in global oil prices and other policies.

    “The fall in global oil prices, the suspension of external debt payments by the government, and the possible IMF extended credit facility will have the potential to control the exchange rate.

    “The control of the exchange rate will build up into a reduction in inflation since the greater part of the Ghanaian inflation is imported.”

  • Cedi fall to be controlled in 2023.. if things remain same as expected – Economist

    Cedi fall to be controlled in 2023.. if things remain same as expected – Economist

    Adnan Adams Mohammed

    An economist with the University of Ghana has expressed hope of taming the unprecedented free fall of the local currency, Cedi, if the economic conditions remain same as expected this year.

    As many economists are expecting the fall in global oil prices, the successful suspension of external debt payments by the government, and the possible IMF Board approval for the Extended Credit Facility (ECF) will help the managers of the economy have the power to control the exchange rate.

    The Lecturer cum Honorary Fellow at Solidare Ghana, likened 2022 economy to the days of the “Kalabule” years between 1972 and 1982 as the Ghanaian Economy went through turbulence in 2022 with inflation and exchange rate hitting unprecedented levels of 50.3% and GHC14.3 to US$1.0, respectively.

    “The control of the exchange rate will build up into a reduction in inflation since the greater part of the Ghanaian inflation is imported”, Professor Lord Mensah, a lecturer at the UG Business School indicated in his expectations for 2023.

    Although, unenthused about the way the government is handling the Domestic Debt Exchange Program (DDEP), he indicated that 2023 is sequentially going to be about government completing the ongoing DDEP; Have an IMF Board level program approval within the year’s first two quarters; and Leverage on the domestic debt exchange program and the IMF board-level approval to negotiate external debt exchange.  

  • Cedi to depreciate further next year

    Cedi to depreciate further next year

    The Economist Intelligence Unit (EIU) says the local currency, the cedi is likely to deprecate further against the dollar by 22 percent in 2023.

    This will rank the local currency as the 3rd weakest performing currency on the African continent, according to its Africa Outlook 2023 Report.

    The EIU expects the exchange-rate weakness to continue into 2023, albeit to a lesser degree.

    “Most African currencies have lost substantial value against the US dollar during 2022 and we expect exchange-rate weakness to continue into 2023, albeit to a lesser degree”.

    According to the report, the currencies of the troubled states of Sudan and Zimbabwe will be among the weakest in the world during 2023, while Ghana, Malawi, Sierra Leone, Ethiopia and Egypt—which will all suffer from elevated rates of inflation—will see their currencies depreciate by more than 10% against the US dollar.

    It further said that African powerhouses of Nigeria, South Africa, Angola, Algeria and Kenya will not be exempted from the currency weakness and will experience further depreciation of their currencies against the US dollar in 2023.

    Meanwhile, the Zambian kwacha will continue its performance as Africa’s best performing currency in 2023 with an appreciation of about 8% in value to the American greenback.

    It will be followed by Burkina Faso’s CFA and Cameroon’s which are all expected to appreciate against the US dollar.

    The Ghana cedi has so far in 2022 lost a little over 27% in value. It is presently going for ¢11.25 to one US dollar in the retail market or the forex bureau.

    After registering one of its worst performances in the first 11 months of 2022, it however improved in value strongly after the Staff-Level agreement between the International Monetary Fund and the government was announced at the beginning of December, 2022.

  • Modalities for the Debt Exchange is like ‘studying Thermodynamics’ – fin analyst jest

    Modalities for the Debt Exchange is like ‘studying Thermodynamics’ – fin analyst jest

    Adnan Adams Mohammed

    A finance analyst has said, from the way the finance minister is going about with the Domestic Debt Exchange program, is making the whole structure and procedure confusing.

    The analyst explains that, Ken Ofori-Atta has done two turnarounds in less than a week on the structure and procedure for the debt exchange.   

    After a crunch meeting between government and organised labour, forthnight ago, after the later had threatened a nationwide industrial action if pension funds are not exempted from the exchange program, the finance minister announced that pensioners’ money are individuals’ funds that are managed by Trustees and as such should also be exempt same as an Individual funds invested in government bonds which were already exempted.

    A day later after exempting the pension funds, the Mr Ofori-Atta announced new modalities for the exchange program but now including individual funds invested in government bonds.

    “So now, on what basis are pensioners’ funds invested in government bonds exempt?”, Alex Mould quizzed.

    “I am confused even more than I was yesterday. It is like studying Thermodynamics. The more you learn the less you know!!”

    According to a senior fellow at IMANI Africa, Bright Simmons, the debt program represents, undoubtedly, the largest single transfer of wealth from the Ghanaian private sector to the government in a single fiscal measure, in living memory.

    It is equivalent to doubling taxes on the entire corporate sector and giving the bill to only banks, insurance companies, pension funds and a few other investor categories to pay.

    Due to the Ghana-IMF programme, the government has announced measures to deal with the economic crisis including the debt exchange programme, freezing of public sector employment, and a haircut on all government bonds among others.

  • Editorial: Turning  around the economy in 2023

    Editorial: Turning  around the economy in 2023

    2022 goes down in the global economic history books as the year Ghana faced the worst of economic turmoil since the 1983 economic crisis the faced during the military juntas era.

    The local currency, Cedi, was ranked the worst performing currency globally. Inflation reached all time highest for a period of two decades. The country’s debt surpassed our Gross Domestic Product among other key macroeconomic indicators.

    However, the Finance Minister, Ken Ofori-Atta, says the government will put in place stronger foundations in 2023 to change the country’s economy for the better.

    He is quoted to have said; “The ensuing years will focus on building an entrepreneurial and export-driven economy as we grow the economy to protect and create jobs, tackle inflation, and strengthen our currency. The importation of food should soon be a thing of the past.

    “2023 must be our “comeback” year. A year in which we put in place stronger foundation that would allow us to change our country for the better and in a way that is enduring, inclusive and transformational.

    “We all have a role to play. And I urge us all to work together with the Government and support the various interventions being implemented to kick–start our recovery in a determined, bold and courageous way,” MrOfori-Atta said.

    The finance minister bet his hopes on the recently announced debt exchange programme and the staff-level agreement with the International Monetary Fund on a $3 billion bailout have contributed to the rebound of the economy.

    “The launch of the debt exchange programme, coupled with the signing of the Staff Level Agreement with the International Monetary Fund, have aided our stability efforts and have in particular contributed significantly to the rebound of our currency.

    “While accommodating the inputs of stakeholders, we must do all we can to sustain the gains of these initiatives keeping in sight the urgency of obtaining IMF Board approval in Q1 2023. The cost of this not succeeding will be too huge for our economy.”

    The assurance is in the good direction, if only the government machinery will walk their talk.

    We at www.newsguideafrica.com therefore urges the government to be bold enough to solicit for better counsel from all those that matters in the economic management cycle, implement bold but better economic policies that will cut unnecessary expenditures where increasing domestic revenues.

    With these, we can also be hopefully of a turnaround for the economy this year.

  • Gold for Oil policy suffers criticism…described as “zero-sum-game’

    Gold for Oil policy suffers criticism…described as “zero-sum-game’

    Adnan Adams Mohammed

    Government’s touted ‘game changer’ policy, Gold for Oil, intended to stem the exchange rate escalation has been receiving criticism from the energy industry experts as to the viability of the policy.

    The policy, as indicated by government is already receiving attention from global fuel traders and expecting its first consignment in second week of this month, January 2023.

    But the former National Petroleum Authority boss has described the deal as a ‘zero sum game’.

    The energy and finance analyst justified his comment that, from the way Bank of Ghana is redirecting the gold flows from the Small Scale Mining Companies into the banking sector directly, he do not see exports increasing nor imports decreasing and this will add up nothing to the current fuel trade pattern and its effect on the forex reserves.

    “Unless we put some sort of policy to curb under-used imports or increase taxes on non-essential imports”, Alex Mould, who is also a former GNPC Boss and Executive Director with Standard Chartered Bank suggested in an interview last week.

    He explained the ‘zero sum game’ description of the policy as that; “The trader who import products into the market and the main ones who buy gold from the Small Scale Mining Companies (SSMC) (that is, Melcoms and Palaces etc) were using the Cedis obtained from their local sales to buy Gold directly or indirectly and exporting it and obtaining the forex directly and not through the banking system. So the gold exports were going to these traders directly or indirectly and not in the hands of BoG or the Commercial banks.

    So, now that Bank of Ghana is redirecting the gold flows from the small scale mining companies into the banking sector directly through bank of Ghana.

    “The way I see it it’s a Zero-sum game because i do not see the exports going to increase nor do I see  imports decreasing unless we put some sort of policy to curb underused imports or increase taxes on non-essential imports.”

    “What we have told BoG  to do was to allocate some foreign exchange from our exports of gold, timber and oil which passes through Bank of Ghana and some of the commercial banks directly to the essential imports of the country, which include petroleum products building materials for industries and medical equipment and consumables as well as education consumables.

    “BoG never did that fully, although some partially done in the 2010-2016 era.

    The government had been working on the new policy to buy oil products with gold rather than US dollar reserves for the past few weeks. The move, announced earlier by Dr Bawumia, was 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 US$6.6bn at the end of September 2022, equating to less than three months of imports cover. That is down from around US$9.7bn at the end of last year, according to BoG.

    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”, Dr Bawumia said a few weeks ago.

    Using gold would prevent the exchange rate from directly impacting on 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.

    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 was shut down after an explosion in 2017.

    Meanwhile, the Executive Director of African Center for Energy Policy (ACEP) is worried that, the policy might hand over control of gold and oil to politicians.

    “The structure presented as gold-for-oil only seeks to hand control of the gold and oil value chain to politicians. No other value can be deduced. It is obvious that if cheap oil comes to Ghana, other unknown factors will be responsible and not gold”, Benjamin Boakye indicated in a statement issued last week. “The government has still not been forthright about the cost of the structure to justify its competitiveness to the current private sector-led approach.”

    Mr Boakye also said the government agencies involved in the policy, the Bulk Oil Storage and Transportation (BOST), Tema Oil Refinery (TOR) and the Precious Minerals Marketing Company (PMMC), are historically poor performers in oil and gold-trading.

    In his view, “interventions of this magnitude should not leave people in doubt in the interest of good governance and assurance of the international community which has shown significant interest in Ghana’s gold for oil programme.”

    “The government also needs to be cautious and guided by the challenging context of state agencies in the oil and gold business because when these agencies make losses, it is the public that pays, and the energy sector is already inundated with debts because of similar trading abuses. There are no guarantees in the current structure that insulates the public from debt.”

  • Govt likely to achieve 6.6% deficit-BoG

    Govt likely to achieve 6.6% deficit-BoG

    By Elorm Desewu

    The Bank of Ghana, (BoG), has revealed that the government could achieve the revised budget deficit of 6.6 percent of GDP and a primary surplus of 0.1 percent of Gross Domestic Product, (GDP) through aggressive revenue mobilization.

     According BoG, the fiscal data shows that both revenues and expenditure outturns for the first nine months of 2022 fell short of their respective targets. The deviations in revenue stem partly from lower-than expected receipts.

    The expenditures performance on the other hand could be attributed to the build-up of arrears, considering the low statutory transfers.

    “Aggressive revenue mobilization and strengthened commitment controls in the ensuing months of 2022 will contribute immensely to achieving the revised end year budget deficit of 6.6 percent of GDP and primary surplus of 0.1 percent of GDP” it said.

    Government budgetary operations resulted in an overall budget deficit of GH¢44,021.8 million (7.4% of GDP) at the end of the first nine months of 2022. This was higher than the target of GH¢36,684.4 million (6.2% of GDP) by 20.0 percent. The overall fiscal deficit of GH¢44,021.8 million was financed largely from domestic sources with some external support.

    Domestic financing (net) was GH¢36,801.4 million (6.2% of GDP), substantially higher than the target of GH¢26,324.7 million (4.4% of GDP). Foreign financing on the other hand, was a net inflow of GH¢6,531.0 million (1.1% of GDP), far lower than the target of GH¢12,459.4 million (2.1 % of GDP).

    The pace of revenue mobilisation remained below target, reflecting in both tax and non-tax revenue. For the first nine months of 2022, total Revenue & Grants was GH¢65,398.8 million (11.1% of GDP), lower than the target of GH¢67,307.4 million (11.4% of GDP).

    The revenue outturn represented 97.2 percent of the target and recorded a year-on-year growth of 38.5 percent. During the review period, domestic revenue totalled GH¢64,601.4 million (10.9% of GDP), below the target of GH¢66,503.4 million (6.9% of GDP).

    The revenue outcomes reflected mixed performances for both tax and non-tax proceeds.  Tax revenue, comprising taxes on income & property, taxes on domestic goods and services and international trade taxes, was GH¢49,055.3 million (8.3% of GDP), lower than the target of GH¢50,414.8 million (8.5% of GDP).

    This represented a negative deviation of 2.7 percent.  Taxes on income and property, made up of personal income tax (PAYE), self-employed taxes, company taxes (including taxes on oil), royalties from oil and minerals, other revenue, and airport taxes totalled GH¢24,787.2 million (4.2% of GDP).

    This outturn was 3.2 percent below the target of GH¢25,601.9 million (4.3% of GDP).  Taxes on Domestic Goods and Services comprising Domestic VAT, Excise Duty, GET Fund Levy,National Health Insurance Levy (NHIL), Communication Service Tax (CST), ElectronicTransaction Levy (E-Levy) and COVID-19 Health Levy all summed up to GH¢20,889.0 million (3.5% of GDP) and exceeded the target of GH¢20,787.1 million by 0.5 percent.

    On a year-on-year basis, the outturn recorded a growth of 30.2 percent.  Taxes on International trade mainly from import duties was GH¢6,221.6 million (1.1% of GDP),· below the target of GH¢6,133.8 (1.0% of GDP) by 1.4 percent, and represented 26.8 percent yearon-year growth.  

    Tax refunds was GH¢2,842.5 million, higher than the target of GH¢2,107.9 million for the period and registered a year-on-year growth of 39.1 percent Non-Tax revenue for the review period totalled GH¢11,048.9 million, representing 90.8 percent of the target, and a year-on-year growth of 81.7 percent.

    The underperformance of this revenue handle was mainly due to lower collection efforts by some large and medium collectors as well as unrealised dividend payments. Other revenue measures made up of ESLA proceeds, raked in a total of GH¢4,217.3 million and was 19.3 percent above the target of GH¢3,535.3 million.

    Government received project grants in the sum of GH¢797.4 million lower than the envisaged target of GH¢804.0 million by 0.8 percent. This outturn was also lower than the GH¢847.4 million recorded in the corresponding period of 2021, thus reflecting a yearon-year decline of 6.0 percent.

    Government spending and arrears clearance was broadly within target, however, some key expenditure lines recorded overruns. Total expenditures & arrears clearance, for the first nine months of 2022, summed up to GH¢99,570.1 million (16.8% of GDP), below the target of GH¢102,566.8 million (17.3% of GDP).

    This outturn represented a year-on-year growth of 30.1 percent. The outturn was also 97.1 percent of the target. Of the expenditures,  Compensation of Employees (including wages and salaries, pensions & gratuities, and other wage related expenditure) was GH¢27,146.3 million, lower than the target of GH¢27,947.0 million.

    This outturn represented 97.1 percent of the target. In terms of fiscal flexibility, compensation of employees constituted 42.0 percent of domestic revenue mobilized, better than the 50.4 percent recorded in the corresponding period of 2021.  

    Use of Goods and Services totalled GH¢4,233.9 million, lower than the expected target of GH¢5,117.2 million. The outturn was 17.3 percent below the target, but recorded a year-on-year growth of 25.9 percent.  

    Total interest payments of GH¢32,101.1 million was higher than the projected target of GH¢30,890.5 million by 3.9 percent, and accounted for 32.2 percent of total expenditure. It also constituted 49.7 percent of domestic revenue, compared with 54.7 percent recorded in the corresponding period of 2021.

    Domestic interest payments accounted for 78.0 percent of the total interest payments during the period under review.  Grants to other Government units consisting of National Health Fund, Education Trust Fund (GETFund), Road Fund, Energy Fund, District Assemblies Common Fund (DACF), Retention of IGFs, transfer to GNPC and other earmarked funds all summed up to GH¢17,562.0 million, above the envisioned target of GH¢16,820.1 million by 4.4 percent.

    It also recorded a year-on-year growth of 57.7 percent. Other Expenditure made up of ESLA Transfers, Covid-19 related expenditure, and Other critical spending, for the first nine months of 2022 was GH¢7,093.9 million.

    ESLA transfers of GH¢3,816.3 million was above the projected target of GH¢3,319.8 million by 15.0 percent. Acquisition of Non-Financial Assets for the period under review was GH¢10,891.7 million (1.8% of GDP), lower than the programmed target of GH¢12,028.3 million (2.0% of GDP) by 9.5 percent. This outturn represented a year-on-year increase of 20.0 percent.

  • Organised labour successfully gets pension funds exempted from Debt Exchange

    Organised labour successfully gets pension funds exempted from Debt Exchange

    Adnan Adams Mohammed

    A Memorandum of Understanding has been signed by the Ministry of Employment and Labour Relations and organised labour last week to exempt pension funds under government’s Domestic Debt Exchange (DDE) Programme.

    The exemption was announced after a meeting between the Government of Ghana (GoG) represented by the Ministry of Finance, Ministry of National Security and the Ministry of Employment and Labour Relations, on one hand and Organised Labour/Associations, on the other hand.

    The meeting was premised on threats of nationwide industrial actions by organised labour on demand for exempting their pension funds from the government’s unpopular DDE. Subsequent to this, the National House of Chiefs called on the government to engage the labour unions on the “difficult measures” being put in place to “revive the ailing economy” to enable them to appreciate the rationale behind it.

    “Government and Organised Labour shall “however work together to explore mutually beneficial options within the debt sustainablility limits and to also promote macroeconmic stability and economic recovery in the spirit of social partnership,” a statement issued at the end of the government-organised labour meeting posited.

    Organised Labour had earlier served notice of a nationwide strike from next week, Tuesday, December 27, 2022, due to government’s refusal to exempt pension funds from the Debt Exchange Programme.

    The Secretary-General of Organised Labour, Dr Anthony Yaw Baah, made this known at a press briefing on Monday, 19 December 2022.

    He said the strike has been occasioned by the government’s decision to introduce a debt exchange programme.

    According to him, the strike will be in force until the government exempts pension funds from the planned debt exchange programme. “We are asking the government to exempt us from the debt exchange programme.”

    Due to the IMF programme, the government has announced measures to deal with the economic crisis including the debt exchange programme, freezing of public sector employment, and a haircut on all government bonds among others.

    Meanwhile, speaking at the National House of Chiefs meeting, last week, in Kumasi, the President of the House Ogyeahoho Yaw Gyebi II noted that these measures have caused an uproar on the labour front and there is a need for the government to engage them.

    He also called on the leadership of the labour front to dialogue with the government to enable it to go through the International Monetary Fund (IMF) programme successfully.

    Ogyeahoho Gyebi II, who doubles as the Paramount Chief of the Sefwi Anhwiaso Traditional Area also appealed to Ghanaians to support the government to roll out the IMF programme successfully.

  • Debt-to-GDP to be reversed to 55% by 2028 – Gov’t hopeful

    Debt-to-GDP to be reversed to 55% by 2028 – Gov’t hopeful

    Adnan Adams Mohammed

    The government is targeting to achieve a debt-to-Gross Domestic Product, (GDP), ratio of 55% by 2028 despite the exemption of pension funds from the debt exchange programme.

    According to a senior government official, all stakeholders are committed to ensuring a programme from the International Monetary Fund is secured on time to bring back live into the Ghanaian economy.

    Commenting after government and organised labour reached an agreement to exempt pension funds from the debt exchange programme, the Finance Minister said though exempting pension funds comes as a cost to government, government and organsied labour will work together to close the fiscal gap.

    “Obviously, the issue of exempting pension funds from it [debt exchange programme] is at a cost and we have committed – government  and organise labour – to work together to ensure that we find means of plugging a hole that would ensure that we would return to the 55% thresh hold (debt-to-GDP)”, Ken Ofori-Atta, has expressed optimism. “I think that we are all committed to it because we know it is important to lead us to a board agreement [with the IMF] so that we continue with this success that we have.”

    “We are all in the spirit of Christmas and with the partnership that we have, I want to thank everyone who participated in the way forward”, he pointed out.

    Mr. Ofori-Atta also said the 2023 Budget which the appropriation was passed by parliament last week further brings confidence to the economy.

    “Yesterday, as you know, at 4:30 pm, parliament passed the appropriation and the budget [2023] further bring confidence as to where we are going. So of course,  the strength have been renewed to the spirit of the direction of where the nation is going.

  • Gold for Oil: first delivery in second week of January

    Gold for Oil: first delivery in second week of January

    Adnan Adams Mohammed

    All things being equal, Ghana is expected to take delivery of first consignment of ‘Gold for Oil’ a new oil trade payment agreement within the second week of January 2023.

    Precisely, between 10th and 12th of January, the first consignment of the finished product is going to arrive in this country coming from the United Arab Emirates. All the necessary agreements needed have been executed.

    The good news is that, a lot more interest had been shown by other oil traders.This will help in stabiliszing the local currency against the international trading currencies, especially the U.S dollar, as it will reduce the pressure on the cedi. Oil import is one of the largest commodity the country uses excess foreign currencies to import and mostly create scarcity of the U.S dollar anytime Bulk Oil Distributors (BDCs) are paying for their consignment.

    “This move by the government will take some pressure off the dollar and make it available to other people to avoid increasing pressure on the cedi” , Deputy Energy Minister, Andrew Egyapa Mercer reiterated in an interview last week after a hint by the Vice President on his facebook wall.

    Dr Mahamudu Bawumia announced on Facebook on Thursday, December 22, 2022, that the country will take its first consignment of oil under the gold-for-oil policy in January 2023.

    “I am happy to announce that the Government of Ghana has concluded the arrangements for the operationalisation of the ‘Gold for Oil’ policy.”

    “Consequently, the first oil products under the policy will be delivered next month (January 2023)”.

    “My thanks to the Minister for Energy, Minister for Lands and Natural Resources, Governor of the Bank of Ghana, the Chamber of Mines, PMMC and BOST for their leadership in the operationalisation of the Government’s Gold for Oil Policy. God bless our homeland Ghana”, he said.

    The government had been working on the new policy to buy oil products with gold rather than US dollar reserves for the past few weeks.

    The move, announced earlier by Dr Bawumia, 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 $6.6bn at the end of September 2022, equating to less than three months of imports cover.

    That is down from around $9.7bn 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”, Dr Bawumia said a few weeks ago.

    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.

    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.

    In the 2023 budget presentation to parliament, last week, Mr Ofori-Atta warned that 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.

    Consequently, according to the Legislator. Hon Egyapa Mercer, significant progress had been made as part of efforts to import cheap fuel to Ghana.

    The Gold for Oil barter deal will see the country getting cheaper fuel in exchange for Gold.

    Prices of fuel are expected to go down further after the cheap fuel is introduced into the market.

    Mr. Egyapa Mercer explained that the deal is intended to “compliment what it is that the private sector who are operators within the space are providing.”

    According to him, this move by the government will take some pressure off the dollar and make it available to other people to avoid increasing pressure on the cedi.

    It will be recalled that in November, Vice President Dr. Mahamudu Bawumia announced the deal to ostensibly tackle the country’s “dwindling foreign exchange reserves” and also to address rising prices of petroleum products.

    He said the government expects “this new framework to be fully operational by the end of the first quarter of 2023.”

    Fuel prices at the time of the announcement were high at most fuel pumps across the country, with consumers appealing to the government for an intervention.

    Subsequently, a government delegation was dispatched to Abu Dhabi to negotiate a deal to bring petroleum products onto the Ghanaian market.

    The delegation was scheduled to meet the Chief Executive of the Abu Dhabi National Oil Company (ADNOC), Sultan Al Jaber for a possible deal.