The flagbearer of the New Patriotic Party, Dr Mahamudu Bawumia, has explained in detail what drove him to introduce the Gold-for-Oil and Domestic Gold Purchase programmes.
Speaking in Accra to members of the Ghana National Association of Small-Scale Miners, the former Vice President said two interlinked problems forced him, while serving as Vice President, to “think outside the box” for sustainable solutions.
The first, he said, was the sudden halt in external financing following the impact of the COVID-19 pandemic and the Russia-Ukraine war on the global 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.”
The second problem, he said, was the conditions attached to Ghana’s IMF programme.
While Ghana was under an IMF programme aimed at restoring confidence in the economy, Dr Bawumia said one of the conditions was that the Bank of Ghana could use only $80 million a month to intervene in the foreign exchange 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 behind the Gold-for-Oil programme was to bypass the dollar constraint by using gold to pay for fuel, thereby avoiding a fuel shortage.
Dr Bawumia added that the second idea, the Domestic Gold Purchase Programme, came to him while he was exercising.
He said he asked himself why Ghana, which produces gold every day, had to export cocoa and other commodities to generate dollars for its foreign exchange reserves.
“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 described the idea as “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 subsequently suggested the programme to the Bank of Ghana, which took almost a year to conduct due diligence because of the unconventional nature of the proposal.
According to him, officials were concerned that they could “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.”
