Gold-for-Oil Program Suspended by Ghana’s Central Financial institution Boss

(Bloomberg) — Ghana’s new central financial institution chief has suspended the West African nation’s program of paying for oil with gold and mentioned he expects the cedi to stabilize after it’s volatility of final yr.

“We intend to keep up an acceptable financial coverage stance,” Financial institution of Ghana Governor Johnson Asiama, 56, mentioned in an interview on Friday. Along with commitments for fiscal self-discipline underneath the administration of President John Mahama, that “ought to assist us preserve stability within the international trade markets,” he mentioned.

With rates of interest at 27% and inflation easing to 23.5% in January, Asiama mentioned higher financial and financial policy-coordination ought to assist cool value pressures because the nation places the financial trauma of its 2022 debt default behind it. Africa’s largest gold producer needed to search a $3 billion bailout from the Worldwide Financial Fund and restructure its debt after defaulting on its obligations.

After shedding 19% of its worth towards the greenback final yr, the governor additionally noticed the cedi avoiding extra of the “excessive volatilities” it has witnessed in current months.

Countering forex swings was the rationale the earlier authorities, which Mahama convincingly beat in December elections, launched the gold-for-oil program, with the central financial institution shopping for gold in native forex after which utilizing it to barter or buy oil.

“We’ve needed to incur some losses on that,” Asiama, who accomplished his doctorate in economics from the College of Southampton, advised Bloomberg Tv’s Ondiro Oganga with out giving particulars. “So we’ve put some suspension” on the commerce, he mentioned.

Ghana’s oil import invoice was $4.5 billion in 2024. As of September, the Financial institution of Ghana had purchased 65.4 tons of gold for its international reserves in addition to for the execution of the barter program, with the previous reaching 30.5 tons by the top of final yr.

The central financial institution might take away itself from this system to buy bullion and hand the position to a quickly to be set up Gold Board, he mentioned.

“Gold-for-oil shouldn’t be a panacea to coping with the trade price dynamics” or the inflation downside, mentioned Godfred Bokpin, a finance lecturer on the College of Ghana Enterprise College. “If the brand new administration can vigorously spend money on agriculture and run it effectively, inflation may decline to 13% by the shut of this yr. Our downside is basically meals inflation.”

Story Continues