Governor of the Bank of Ghana (BoG), Dr Ernest Addison, has said the International Monetary Fund (IMF) is aware of government’s plan to purchase refined crude oil with gold.
Speaking at a press briefing following the announcement of a new policy rate on Monday, November 28, the Governor averred that although the IMF is aware of government’s “Gold for Oil” policy, discussions on the policy are still ongoing in view of the fact that Ghana is yet to attain a Staff Level Agreement with the Bretton Wood Institution.
Governor Addison made the assertion in response to the question on whether or not the IMF is aware of the new policy amid ongoing negotiations with the Fund.
Ghana ordered large gold-mining companies to sell 20% of the metal they refine to the nation’s central bank, as the government embarks on a plan to barter bullion for fuel.
The directive will be effective Jan. 1, Minister for Lands and Natural Resources Samuel Jinapor said in a notice posted on Vice President Mahamudu Bawumia’s Facebook page. The government also ordered small-scale miners to sell their gold to the state-owned Precious Minerals Marketing Co.
Ghana is struggling to stem a slide in the cedi, which has dropped 57% this year, making it the world’s worst-performing currency. Bawumia said on Thursday the government was planning to use bullion to buy fuel in an attempt to reduce demand for dollars.
The Bank of Ghana and the government’s marketing arm will buy the gold from companies including Newmont Corp., AngloGold Ashanti Ltd., Gold Fields Ltd. in “cedis at spot price with no discounts,” according to the notice. Ghana is Africa’s second-biggest gold producer.
Meanwhile, the Central Bank has once again increased its monetary policy rate by 250 basis points (2.5%).
On the back of the increment, the Bank of Ghana’s monetary policy rate rises to 27% from the previous rate of 24.5%
The hike in policy rate by the BoG is on the back of the increment in the country’s headline inflation rate which hit a record high of 40.4% in October.
Given the hike in policy rate, interest rates on loans to the private sector is expected to increase, further making costs of production by businesses in the country more expensive.
Announcing the new policy rate, the Governor of the Central Bank, Dr Ernest Addison, noted the Bank’s decision to increase the policy rate is due to significant upside risks to the country’s headline inflation as inflation is expected to remain elevated in the short term.