March 29, 2023
Vice President Dr. Mahamudu Bawumia and Prof Steve Hanke

Steve H. Hanke, a professor of Applied Economics, Johns Hopkins University, has described as “bogus” Vice President Dr. Mahamudu Bawumia‘s announcement of a new policy of buying oil products with gold rather than U.S. dollars.

According to him, Ghana’s vice president is grasping for straws with this new gold-for-oil plan.

The new plan as proposed by the government is to tackle dwindling foreign currency reserves coupled with the demand for dollars by oil importers, which is weakening the local cedi and increasing living costs.

If implemented as planned for the first quarter of 2023, the new policy “will fundamentally change our balance of payments and significantly reduce the persistent depreciation of our currency,” Bawumia said in a post on his Facebook timeline.

He explained that using gold would prevent the exchange rate from directly impacting fuel or utility prices as domestic sellers would no longer need foreign exchange to import oil products.

“The barter of gold for oil represents a major structural change,” the vice president stressed.

But Prof Steve Hanke in a tweet said, “VP [Vice President] of Ghana Mahamudu Bawumia unveiled a plan to buy oil with gold instead of the USD. Bawumia claims that his gold-for-oil plan will “reduce the persistent depreciation of our currency.”

“Bawumia is grasping for straws. His plan is BOGUS,” he added.

Ghana’s inflation rate is currently at 40.4% with the cedi depreciating by 53.8% in 2022. Fuel prices have increased more than three times this year with the cost of living rising.

The government is seeking an International Monetary Fund (IMF) bailout to support the economy.

Moody’s, on the other hand, has also downgraded the Government of Ghana’s long-term issuer ratings to Ca from Caa2 or further junk status and changed the outlook to stable.

This concludes the review for the downgrade that was initiated on September 30, 2022.

“The Ca rating reflects Moody’s expectation that private creditors will likely incur substantial losses in the restructuring of both local and foreign currencies debts planned by the government as part of its 2023 budget proposed to Parliament on 24 November 2022″, a statement published on its website said.


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