Vice-President Mahamudu Bawumia
Former Vice-President and New Patriotic Party (NPP) flagbearer for the 2028 presidential election, Dr Mahamudu Bawumia, has explained that the Domestic Gold Purchase Programme and Gold-for-Oil policy were introduced as emergency interventions to help Ghana navigate severe foreign exchange shortages during the country’s recent economic crisis.
According to him, the COVID-19 pandemic and the Russia-Ukraine war disrupted global markets and contributed to Ghana losing access to international capital markets, putting significant pressure on the country’s balance of payments and foreign exchange reserves.
Dr Bawumia gave the explanation during an engagement with members of the Ghana National Association of Small-Scale Miners as part of consultations on reforms to address challenges confronting the mining sector.
Forex Constraints
He said that before the crisis, Ghana regularly accessed the international capital markets to raise foreign currency to support economic management.
“Before then, we would normally go to the capital markets, raise $3 billion and then go on in terms of our economic management,” he said.
Dr Bawumia said that financing avenue suddenly became unavailable, leaving Ghana with insufficient foreign exchange to meet its normal economic requirements.
He added that the situation was complicated by Ghana’s programme with the International Monetary Fund (IMF), which, according to him, restricted the Bank of Ghana’s foreign exchange intervention to a maximum of US$80 million a month.
With demand exceeding available supply, he said, the cedi came under sustained depreciation pressure.
“We were really constricted” in terms of foreign exchange availability, he said.
Gold-for-Oil Response
Dr Bawumia said the situation prompted policymakers to explore alternative means of financing critical imports without relying entirely on scarce US dollars.
Ghana’s position as a leading gold producer consequently presented an opportunity to leverage the country’s natural resources.
“Why don’t we come up with the idea of Gold-for-Oil to start with, to exchange our gold for oil so that we get out of this foreign exchange construct,” he recalled.
According to him, directly exchanging gold for petroleum products reduced pressure on Ghana’s limited foreign exchange resources and helped avert potential difficulties in financing fuel imports.
He argued that without such an intervention, the foreign exchange shortage could have resulted in serious difficulties in securing petroleum products for the country.
Domestic Gold Purchases
Dr Bawumia said implementing the Gold-for-Oil policy required access to sufficient quantities of gold, making the purchase of locally produced gold increasingly important.
This, he explained, informed the increased emphasis on the Domestic Gold Purchase Programme and the strategic use of Ghana’s gold resources.
He said Ghana’s position as Africa’s leading gold producer and one of the world’s major producers meant the country had a resource it could leverage during periods of severe foreign exchange constraints.
The former Vice-President maintained that the two policies formed part of a broader response to protect the economy, secure critical imports and prevent Ghana’s foreign exchange difficulties from developing into an even deeper economic crisis.
He said the experience demonstrated the importance of developing innovative mechanisms to leverage Ghana’s natural resources in responding to economic shocks.
