Why I proposed Gold-for-Oil and Domestic Gold Purchase Programme – Dr. Bawumia reveals

The architect of Ghana’s two most unconventional economic policies, Dr. Mahamudu Bawumia, has explained, for the first time in detail, what drove him to introduce them.

Speaking in Accra to members of the Ghana Small-scale Miners Association, the former Vice President said two interlinked problems forced his hand when he was Vice President to “think outside the box” for sustainable solution.

Problem one, he said, was the sudden stop in external financing following the impact of COVID-19 and the Russia-Ukraine war on the economy.

“That tap (external financing) was shut for Ghana and quite a few countries. And for us, it resulted in a balance of payments crisis.”

Problem two, he continued, was IMF conditions to the country.

While Ghana was in an IMF programme to restore confidence, one condition. DR. Bawumia explained, was that the Bank of Ghana could only use $80 million a month to intervene in the forex 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. Because when demand exceeds supply, prices would go up, isn’t it? The cedi started depreciating daily.”

He said the idea for Gold-for-Oil was to bypass the dollar constraint entirely by bartering gold for fuel to avoid shortage of fuel crisis.

He added that the second idea, Gold-for-Reserves, came to him while exercising.

He asked himself: 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?

Dr. Bawumia called it “out-of-the-box thinking.”

“It was not a textbook idea. There’s no textbook in economics that will tell you about the Gold-for-Reserves programme.”

He said he suggested it to the Bank of Ghana, which took almost a year to do due diligence because it was so unorthodox, and we’re worried they might “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, he said, other countries are coming to learn from Ghana.”

Fiifi Malik

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