The arrival of Ghana’s first oil from the UAE, has reignited the debate about the ‘Gold for oil’ policy.
John Jinapor, MP for Yapei Kusawgu constituency is not the least enthused about the policy.
The former Deputy Energy Minister calls it a “lazy man’s approach” that will land the country into debt eventually.
On Monday, January 16, Ghana took delivery of 40,000 metric tons under the policy from the United Arab Emirates.
The government believes this will reduce the pressure on the country’s foreign currency reserves. This is because the huge amount of dollars spent on importing oil weakens the cedi and worsens inflation.
But Mr. Jinapor disagrees with the government’s thinking. He told Citi FM that the policy may cause more harm than good.
“I’m not a prophet of doom, but from all the documents I have read, we are heading for a debt crisis out of this so-called gold for oil deal”.
“It’s a lazy man’s approach because gold, first of all, needs to be expressed in its monetary value. You can’t just say take an ounce of gold and give me a barrel of oil, as it used to be in the real barter that you are talking about. You must first of all, value that gold in dollar terms, and that is the function of currency or money.”
Mr. Jinapor wants government to come clean on the full details of the barter trade arrangement.
“Where are the details? What’s the cost of the gold, and at what quantities of gold did they [government] buy? At what price did they sell the gold? How much is the oil producer selling crude to us?” he asked.
He says the deal cannot in anyway guarantee cheaper oil as suggested by the government.
“Where is that cheaper oil? Let’s assume you don’t want your currency to depreciate, that is not the same as buying cheaper oil. Cheaper oil means that oil is GH¢100, and I’m getting it at GH¢90 or GH¢80, that is what we say is cheaper oil. If you are doing this to manage your currency, if you are saying Ghana we are so broke that our reserves are depleted, and so we don’t have enough dollars to buy crude, so we are using gold as a backup so that we can buy crude, it is a different matter. Be honest and sincere, don’t tell us that you are going to get cheaper crude or cheaper finishing products, that is not the situation,” the legislator fumed.
What the Vice President said about the policy
Dr. Mahamudu Bawumia says Ghana’s gold for oil program will give Ghana the space to accumulate more international reserves. According to him, the country will save the $3 billion it spends on oil imports.
He added that the use of gold was specifically for oil imports in the face of declining foreign exchange reserves.
“Unfortunately some people have misinterpreted this as Ghana being against the use of the US dollar in international transactions. Far from it. We want to accumulate more US dollar reserves in the future.”
Dr. Bawumia says a major source of cedi depreciation is the demand for forex to finance oil imports.
“If we implement the gold for oil policy as 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.”
Source – Tru News Report