Delivered by the ship SCF YENISEI, 41,000 metric tonnes of fuel purchased under the government's ground-breaking "gold-for-oil" policy have arrived at the Tema Port.
In a ground-breaking new policy designed to counteract the negative impacts of the depreciation of the cedi on the Ghanaian economy, 41,000 metric tonnes of comparably less expensive fuel were purchased from the international market with gold rather than US dollars.
Late last year, the cedi's rapid devaluation against the dollar caused fuel prices to soar, which had the knock-on effect of raising the cost of products and services in the local economy. The goal of the strategy of exchanging gold for oil was to protect the Ghanaian economy from further cedi depreciation.
Supplied to the Bulk Oil Storage and Transportation Company (BOST) for further sale to Bulk Distributing Companies (BDCs) throughout Ghana are the 41,000 metric tonnes that were purchased under the policy.
The sale's proceeds would be deposited in an offshore account at the Bank of Ghana, where they would be used to buy additional gold in order to continue buying petroleum on the world market.
The new cargo, which has a $40 million market value, was acquired through a negotiation facilitated by the Economic Management Team, which is headed by Vice President Dr. Mahamudu Bawumia.
Last year, Dr. Bawumia declared that the Ghanaian government will begin purchasing oil on the world market using gold rather than dollars.
The Vice President added that by putting the policy into effect, the cedi-to-dollar exchange rate will no longer be a factor in determining how much fuel is priced in Ghana.
Our foreign exchange reserves have been exhausted, limiting our access to foreign currency, yet demand has not decreased and has remained mostly stable.
Depreciation arises when the supply cannot meet the demand.
The government has taken the decision to pursue a strategy of utilising our gold to buy oil products in order to solve this basic dilemma of the ongoing depreciation and its impact on fuel, utility prices, food, and other costs.
According to Bawumia, "If we execute it as we have envisaged, it will substantially impact our balance of payments and greatly lessen the ongoing depreciation of our currency with its corresponding hikes in fuel, power, water, transport, and food prices."
He said, "It is pretty easy. This is due to the fact that, after we adopt it, the exchange rate will no longer directly factor into the formula used to calculate the price of gasoline or utilities since fuel purchases for transportation and utilities will be made in cedis rather than dollars. The transaction happens there because gold is used to purchase the fuel. However, after you sell that fuel, you do it in cedis, and the Bank of Ghana uses those cedis to acquire additional gold and oil, so the cycle continues. In effect, you are eliminating the exchange rate from the calculation.
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