Ghana wants to trade its gold for oil

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Processing gold into bullion at the AngloGold Ashanti mine, Obuasi, Ghana in 2003.

The government reached an agreement ” provisional “ with Dubai-based Emirati National Oil Company (ENOC), said Kabiru Mahama, economic adviser to Ghanaian Vice President Mahamudu Bawumia.

Ghana, Africa’s second-largest gold producer, last week asked major mining companies to sell to the Central Bank of Ghana from 1er January 20% of the metal it refines to build bullion reserves that will be used to import fuel and reduce demand for dollars after its currency has fallen 57% this year.

“We are open to any international oil trading company that is interested, Mahama said in a November 25 phone interview. From October 2023, all our oil product needs will be exchanged for gold. »

ENOC has not yet commented on this agreement with Ghana.

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Ghana is struggling to stabilize its economy and sees the barter system as a way to stem the fall of the cedi, the world’s worst performer among the currencies tracked by Bloomberg. The weakening of the cedi fuels inflation and depletes the country’s foreign exchange reserves. The government of President Nana Akufo-Addo, which has lost access to international financial markets this year due to soaring debt and loan servicing costs, plans to ask international bondholders to accept losses on their investments to pave the way for a bailout from the International Monetary Fund (IMF).

From government to government

Dubai has long been associated with the gold trade. But the United Arab Emirates (UAE) are regularly suspected of money laundering thanks to regulatory loopholes that would allow them to import bullion smuggled out of war zones, allegations rejected by Dubai, which argues that since 2021, the trade in gold has been incorporated into the country’s anti-money laundering reporting system, run by the federal government.

“ENOC wants to give us refined oil for gold, said Steve Opata, head of financial markets at the Bank of Ghana, in an interview on Monday (November 28th). Depending on the quantities they agree to give us, we will give them the equivalent in gold. This is a government-to-government program. »

Ghana spends around 10 billion dollars (9.63 billion euros) a year on imports, of which 48% is for the purchase of fuel. The government hopes bartering gold for refined crude will help it replenish gross international reserves which fell to $6.7 billion at the end of October, barely covering 2 .9 months of imports, against 10.8 billion dollars a year earlier.

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The fall in the currency led to an acceleration in inflation, which reached 40.4% in October. This prompted the Central Bank to raise borrowing costs by 250 basis points to 27%, the highest level in more than nineteen years.

The Bank of Ghana will buy gold from mining companies in cedis. Ghana began buying gold last year, for the first time in sixty years, to bolster its foreign exchange reserves. This last measure aims to increase these purchases. “If we implement it as planned, it will fundamentally change our balance of payments,” Mr. Bawumia said in a Facebook post. The demand for dollars from oil importers “Faced with dwindling foreign exchange reserves leads to a depreciation of the cedi and an increase in the cost of living with higher prices for fuel, transport and utilities”he added.

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