An Economics Professor at the Johns Hopkins University, Steve Hanke has described Vice President Bawumia’s plan to buy crude oil with gold as bogus.
According to him, the Vice President’s idea that exchanging gold for crude oil would slow down the cedi depreciation is most likely to fail.
Prof. Hanke tweeted that “VP of Ghana Mahamudu Bawumia unveiled a plan to buy oil with gold instead of the USD. Bawumia claims that his gold-for-oil plan will ‘reduce the persistent depreciation of our currency.’ Bawumia is grasping for straws. His plan is BOGUS.”
With regards to this agreement, the Governor of the Bank of Ghana, Dr. Ernest Addison, has said the Precious Minerals Marketing Company (PMMC) would play a key role in the move and would be purchasing more of the gold from licensed gold exporters.
“The PMMC will be providing most of the gold to be used for crude oil swap,” he said during the Monetary Policy Committee (MPC) press conference in Accra on Monday, November 28.
Dr. Addison further revealed that mining companies such as Newmont and AngloGold in Ghana are backing the move and ready to support Ghana during these difficult times.
“The major mines were consulted, Newmont and the AngloGold were all part of the meeting that we had together with the Vice President when the decision was taken that they will, from 2023, sell at least 20 per cent of their production of gold to the central bank” he said.
Meanwhile, Vice President Dr. Mahamudu Bawumia believes that Ghana’s state policy of using gold reserves to pay for oil has been misinterpreted as an attempt by the country to move away from the US dollar for international transactions.
He explained that the import of oil product is around $3billion annually and the major source of cedi depreciation has been the demand for foreign exchange to finance the import of oil product.
This, he noted, is because the exchange rate will no longer directly enter the formula for the determination of fuel or utility prices since not all the domestic sellers of fuel will no longer need foreign exchange to import oil products.