PMMC To Spearhead ‘Gold For Oil’ Deal
The Central Bank has disclosed that the government’s new policy to buy oil products with gold rather than U.S. dollar reserves will be spearheaded by the Precious Minerals Marketing Company (PMMC).
According to the Governor of the Bank of Ghana (BoG), PMMC will play a key role in the implementation of the policy, which has,so far, been lauded by many, with the hope to tackle the dwindling foreign currency reserves, coupled with demand for dollars by oil importers, which is weakening the local cedi and increasing living costs.
At a Monetary Policy Committee (MPC) press conference in Accra yesterday, November 28, Dr. Ernest Addison said the PMMC will be buying a lot of the gold from licensed gold exporters who, he indicated, have significant amounts of gold.
“The PMMC will be providing most of the gold to be used for crude oil swap,” he told the media.
Even before this announcement could be made, The Anchor is reliably informed, the management of Ghana’s assayer with the sole mandate of assaying all gold that leaves the country, headed by Nana Akwasi Awuah as its managing director, has long positioned the company and is ready for the task.
If implemented, as planned for the first quarter of 2023, the new policy “will fundamentally change our balance of payments and significantly reduce the persistent depreciation of our currency,” according to Vice President Dr. Mahamudu Bawumia.
He stated that some analysts and commentators have misinterpreted Ghana’s stated policy of using gold reserves to pay for oil as an attempt by the country to move away from the US dollar for international transactions.
But speaking at the 2022 AGI Awards in Accra, Dr. Bawumia noted that, to the contrary, Ghana’s gold-for-oil programme will give Ghana the space to accumulate more international reserves, as the country will save the $3billion it spends on oil imports.
He further stated 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,” he stated.
He stressed, “Far from it. We want to accumulate more US dollar reserves in the future.”
Vice President Bawumia noted that a major source of Cedi depreciation has been the demand for forex to finance imports of oil products and to address this challenge, government is negotiating a new policy regime where sustainably mined gold will be used to buy oil products.
He explained, “If we implement the gold-for-oil policy as it is 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.”
This, he further noted, is because the exchange rate will no longer directly enter the formula for the determination of fuel or utility prices, since all the domestic sellers of fuel will no longer need foreign exchange to import oil products.