The IMF has called for a review of the Gold for Oil policy
The IMF has called for a review of the Gold for Oil policy

Gold for Oil policy ongoing 

The Gold for Oil policy which was introduced by the government to stabilise fuel prices and the local currency is still ongoing, with more shipments expected soon, the Governor of the Bank of Ghana, Dr Ernest Addison has said.

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The IMF as part of its support for the country has called for a review of the policy to identify associated risks of the programme to the central bank.

The review forms part of ongoing updated safeguards assessment that is being carried out to provide additional support for the review of the Bank of Ghana Act.

The assessment would also review the central bank’s gold purchase programme.

Addressing the media at the recently held Monetary Policy press conference, Dr Addison, said “we are still buying gold and the next shipment will come in soon. We are not only buying gold for oil but we are also buying gold for reserves and this is an area where we have chalked a lot of successes.

“I believe we almost doubled our holdings of gold within the short period we started from eight tonnes to almost 15 tonnes, except that we also gave some up for the oil,” he stated.

The gold for oil policy which has been credited as part of the measures that has led to the stable fuel prices in recent times was announced by the Vice President, Mahamudu Bawumia in December 2022.

Gold for Oil programme 

Under the programme, the government pays for imported fuel products with gold purchased by the Central Bank.

The first consignment of the policy arrived at the Tema Port and discharged into the receptacles of Bulk Oil Storage and Transportation Company (BOST) in January this year.

The 41,000 metric tonnes of the petroleum products, valued at $40 million was delivered by SCF YENISEI and sold by BOST to bulk distributing companies (BDCs) around the country.

Dr Addison said the programme had so far been very successful to the extent that it helps reduce the BDCs forward rates which fed into the pricing of fuel prices.

“That policy has been very good both in terms of building central bank reserves and also helping with the stabilisation of fuel prices. Our reserve level would have been lower without the gold for reserve programme. it helped us during this very difficult time,” he explained.

The IMF programme is also expected to review the BoG’s Act to strengthen central bank’s independence and mitigate fiscal dominance.

The amendments to the BoG Act will feature a stricter limit for monetary financing, mechanisms to monitor and enforce compliance, and a clear definition of emergency situations under which the limit can be temporarily lifted. 

Pending legislative changes, the BoG and the Ministry of Finance has already signed an MoU to eliminate monetary financing during the program.

Commenting on the proposed review of the Act, Dr Addison, said this had become necessary due to some inconsistencies and difficulties in implementing some sections of the Act.

“First is the issue of five per cent budget financing limit, is it the stock measurement? Because at any point in time, the central bank has claims from the government from 20 years ago.

“So is it that we have a stock limit of five per cent of previous year’s revenue or is it the flow starting from a particular period of time? And how are you going to assess that flow relative to the previous year?” he asked.

He said these issues needs to be clarified under the law.

“There is also the issue of emergency, what do you call an emergency? It must be defined carefully and the conditions under the which the rules can be breached,” he mentioned.

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The Governor also pointed out that there were also some procedural issues of the law that were not very clear.
“Who does the reporting to Parliament? Is it the Governor of the Minister of Finance? All these issues must be properly clarified under the law,” he said.

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