Flagbearer of the New Patriotic Party (NPP), Dr Mahamudu Bawumia, has explained what inspired him to initiate the Gold-for-Oil and Domestic Gold Purchase programmes.
He says the programmes were introduced to support the cedi and ensure fuel availability.
According to him, the two programmes were unconventional solutions Ghana adopted when it faced a balance of payments crisis and restrictions on foreign exchange interventions under its IMF programme.
Speaking in Accra to members of the Ghana National Association of Small-Scale Miners, the former Vice President said the sudden cut in external financing following the COVID-19 pandemic and the Russia-Ukraine war were the driving factors.
“That tap [external financing] was shut for Ghana and quite a few countries. And for us, it resulted in a balance of payments crisis,” he said.
The second, he noted, was the restriction under Ghana’s IMF programme, which limited the Bank of Ghana to using only $80 million a month to intervene in the foreign exchange market.
“You can imagine what the demand for foreign exchange for Ghana would be on a monthly basis. Significantly more than $80 million a month. And so, in that framework, there was only one result. When demand exceeds supply, prices would go up. The cedi started depreciating daily,” he said.
Dr Bawumia said the Gold-for-Oil programme was introduced to bypass the dollar constraint by using gold to pay for fuel to avoid a shortage.
On the Domestic Gold Purchase Programme, he said the idea came to him while exercising. “Why does Ghana, which mines gold every day, have to export cocoa to get dollars for its forex reserves? Why not buy the gold we already produce with cedis?” he asked.
He described both initiatives as unconventional, saying “it was not a textbook idea. There’s no textbook in economics that will tell you about the Gold-for-Reserves programme.”
Dr. Bawumia said it took the Bank of Ghana almost a year to conduct due diligence before implementing it because officials feared they could “get into trouble for doing something that was very unorthodox.”
“Finally, they agreed, and Ghana became the first country in Africa, and probably the world, to implement such a programme. Now other countries are coming to learn from Ghana,” Dr Bawumia added.
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