The Ghanaian government is negotiating a new political regime in which it will use its gold instead of its US dollar reserves to buy oil productsVice President Mahamudu Bawumia it said on Thursday in a Facebook post. Reuters first reported this story.

What happened: In a post titled “The Use of Gold To Buy Imported Oil Products,” Bawumia pointed out that amid dwindling foreign exchange reserves, demand for foreign exchange from oil importers is causing the cedi, Ghana’s currency, to depreciate and fuel costs to increase. transportation, utilities, etc.

The cedi has depreciated more than 50% against the dollar in the last year.

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To address this challenge, the government is negotiating a new political regime that will use its gold, rather than its dollar reserves, to buy oil products, Bawumia said.

He said the exchange of sustainably mined gold for oil was one of the most important economic policy changes in Ghana since independence.

“If we implement it as planned, it will fundamentally change our balance of payments and significantly reduce the ongoing devaluation of our currency with the associated increases in fuel, electricity, water, transport and food prices,” Bawumia said. This is because the exchange rate (spot or forward) will no longer go directly into the formula for determining fuel or utility prices as all domestic fuel sellers no longer need foreign exchange to import oil products, he explained.

Why it matters: Ghana’s international gross reserves were around $6.6 billion at the end of September, equivalent to less than three months’ import coverage. according to to the Reuters report. That’s down from nearly $9.7 billion at the end of last year, the report said, citing the government.

At the same time, oil prices have been volatile this year due to supply and demand side concerns arising from the war in Ukraine and demand problems in China. That United States Brent Oil Fund BNO Has…