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Gold for oil – 41,000 metric tonnes of Veep’s promised cheaper fuel arrives in Tema

41,000 metric tonnes of fuel procured under the government’s revolutionary ‘gold-for-oil’ policy has arrived at the Tema Port, delivered by the vessel SCF YENISEI.

Dr Mahamudu Bawumia

The 41,000 metric tonnes of relatively cheaper fuel was procured from the international market with gold instead of U.S dollars in a landmark new policy intended to fight the effects of cedi depreciation on the Ghanaian economy.

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Rampant cedi depreciation against the dollar in the latter part of last year led to a spike in fuel prices, with its attendant effect of an increase in the price of goods and services in the local economy. The gold-for-oil policy was designed to insulate the Ghanaian economy from any future cedi depreciation.

The 41,000 metric tonnes procured under the policy has been delivered to the Bulk Oil Storage and Transportation Company (BOST) for onward sale to Bulk Distributing Companies (BDCs) around Ghana.

Proceeds from the sale would be placed in an escrow account at the Bank of Ghana to be used to procure more gold for further purchase of fuel from the international market.

The new shipment is valued at $ 40 million and was procured in a deal brokered by the Economic Management Team led by the Vice President, Dr Mahamudu Bawumia.

Dr Bawumia announced the government of Ghana’s move to using gold instead of dollars to procure oil from the international market last year.

The Vice President explained that implementing the policy would lead to the exchange rate of the cedi to the U.S dollar being taken out of the equation when it comes to pricing fuel products in Ghana.

“The challenge that we face is a limited access to foreign exchange as our foreign exchange reserves have depleted but the demand has not fallen but been relatively steady…and so the demand exceeds the supply and then you have depreciaiton…to address this fundamental challenge of the persistent depreciation and its impact on fuel, utility prices, food and so on, government has decided to implement a policy of using our gold to buy oil products.

“If we implement it as we have 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” Bawumia explained.

He added: “It is very simple. This is because the exchange rate…will no longer directly enter the formula for the determination of fuel or utility prices once we implement this because the purchases of fuel for transport and utility is going to be in cedis, its not going to be in dollars. Because you are buying that fuel with gold, that is where the exchange takes place. But once you sell that fuel, you sell it in cedis, and then the bank of Ghana uses that cedis to buy more gold and buy the oil, you sell and it goes around in that way. Essentially, you are taking the exchange rate out of the equation”

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