As concerns about the sustainability of the ‘Gold For Oil’ policy deepens, the Bank of Ghana has assured that there’s enough gold to sustain it.
The assurance comes after Ghana took delivery of the first consignment from the United Arab Emirates.
On Monday, January 16, Ghana took delivery of 40,000 metric tons under the policy. It is now clear yet how much gold Ghana offered in exchange for the oil.
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.
Critics say the approach is not viable and cannot be sustained over the long-term. But the central bank thinks otherwise. The Director of Financial Market at the Bank of Ghana, Stephen Opata, says there is no cause for alarm.
He says BoG is well placed to meet the demand for 160,000 ounces of gold per month under the deal. He gave the assurance on Monday, January 16, when he appeared before the Public Accounts Committee (PAC).
“As for the quantities, based on the production numbers we saw last year, gold has picked up. We believe that we can buy enough gold to sustain the program.”
“I must say that the numbers we are currently looking at is about 160,000 ounces per month and that will represent about 50 to 60 per cent of the consumption of the country. According to what PMMC indicates, I think we have volumes to support the program,” Mr Opata said.
A former Deputy Energy Minister, John Jinapor, has called the policy a lazy man’s approach. He told Accra-based Citi FM that the policy may land the country into a debt crisis.
“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.”
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