[Asia Economy Reporter Park Byung-hee] Major foreign media reported on the 24th (local time) that the Ghanaian government plans to pay for crude oil purchases in gold instead of dollars. The purpose is to prevent a decrease in foreign exchange reserves and reduce the risk of a debt crisis.
Mahamudu Bawumia, Vice President of Ghana, announced on Facebook that the government is preparing a policy to purchase crude oil with gold instead of dollars from foreign exchange reserves.
Ghana's foreign exchange reserves have been continuously decreasing due to the dollar demand from crude oil importers. As of the end of September, Ghana's foreign exchange reserves amounted to only 6.6 billion dollars. This level is insufficient to cover even three months of dollar demand from importers. At the end of last year, Ghana's foreign exchange reserves were 9.7 billion dollars.
The dollar demand from importers is also weakening the Ghanaian cedi, which exacerbates inflation.
Ghana is a resource-rich country with various minerals and is the second largest gold producer in Africa. Although it produces crude oil, it relies on imports for refined petroleum products because its only refinery was shut down due to an explosion accident in 2017.
Vice President Bawumia stated that if gold payments are implemented as planned from the first quarter of next year, government financial management will fundamentally change, and the ongoing risk of cedi depreciation can be significantly reduced.
Ofori-Atta, Ghana's Minister of Finance, appeared before parliament on the same day to warn of a serious debt crisis risk. Minister Atta said the government faces a considerable risk of difficulty in debt repayment, and the weakness of the cedi exacerbates the challenges of managing public debt.
Ghana is currently negotiating a bailout with the International Monetary Fund (IMF).
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