Without Gold-for-Oil, We Would Have Had Major Fuel Crisis – Bawumia Reveals His Masterstroke

Flag-bearer of the New Patriotic Party, former Vice President Dr. Mahamudu Bawumia has disclosed that Ghana’s Gold-for-Oil policy and Domestic Gold Purchase Programme were emergency measures designed to protect the country from a devastating foreign exchange crisis in the wake of the COVID-19 pandemic and Russia-Ukraine war.

Speaking on Thursday during consultations with the Ghana National Association of Small-Scale Miners, the 2028 NPP flag-bearer revealed the extent of the economic pressure Ghana faced when international capital markets suddenly closed their doors to the country.

“Before then we would normally go to the capital markets, raise $3 billion and then go on in terms of our economic management,” Dr. Bawumia explained. “But suddenly that gap was shut for quite a few countries.”

The former Vice President painted a stark picture of the situation facing Ghana at the time, describing a balance of payments crisis that left the country scrambling for foreign exchange to pay for essential imports.

He said the crisis was compounded by restrictions imposed under Ghana’s programme with the International Monetary Fund, which limited the Bank of Ghana to intervening in the foreign exchange market with a maximum of $80 million per month.

“You can imagine what the demand for foreign exchange for Ghana would be on a monthly basis – significantly more than $80 million a month,” Dr. Bawumia told the miners’ association.

The consequence, he said, was predictable: “When demand exceeds supply, prices would go up.”

The cedi began depreciating almost daily, and Dr. Bawumia said the situation grew increasingly concerning as he watched similar crises unfold elsewhere.

“In fact, at some point I was getting very concerned because I could see at the same time what was happening in Sri Lanka,” he recalled. “People were out on the streets, they were facing similar foreign exchange constraints and there was shortage of fuel because you couldn’t pay.”

It was against this backdrop that the idea for the Gold-for-Oil programme emerged, the former Vice President said – a realisation that Ghana, as Africa’s largest gold producer, could use its natural resources to directly pay for critical imports rather than relying on scarce US dollars.

“I was one morning exercising when the idea also came,” Dr Bawumia said, adding that Ghana’s position as the continent’s number one gold producer and fifth globally presented a unique opportunity.

The programme would allow Ghana to exchange gold directly for oil, bypassing the foreign exchange constraints that threatened to create fuel shortages.

Dr Bawumia argued the initiative “essentially saved us from a bigger crisis” – because without it, Ghana would have struggled to pay for petroleum products.

The Domestic Gold Purchase Programme, which was launched on 17 June 2021, has since become one of Ghana’s most consequential economic instruments.

According to the Bank of Ghana’s own launch address that day, the Governor acknowledged the support of the Vice President Dr Mahamudu Bawumia, “who got this programme started,” according to bank records. The Minerals Commission, PMMC and Ghana Chamber of Mines were thanked for their collaborative roles.

A Ghana Chamber of Mines bulletin from September 2022 records that following a meeting chaired by Dr Bawumia involving the Economic Management Team, the Bank of Ghana and other stakeholders, gold producing companies agreed to supply approximately 125,000 ounces to the central bank between September and December that year as part of the programme’s expansion.

Newmont Ghana had already sold 3,500 ounces to the Bank ahead of that meeting.

Chamber President Joshua Mortoti confirmed the Chamber’s support, while Chief Executive Sulemanu Koney said members would engage the Central Bank to fast-track implementation.

The programme has seen the central bank accumulate foreign exchange reserves by purchasing locally produced gold in cedis. By one account, purchases reached some $5 billion over a two-year period.

Dr Bawumia’s engagement with small-scale miners on Thursday forms part of broader consultations aimed at identifying practical reforms to address challenges in the mining sector.