Adu Koranteng Writes: Gold for Oil Agreement is the Best Deal in the 2023 Unity Budget

The Minister of Finance, Ken Kuntukununku Ofori Atta last week Thursday, November  24, 2022, presented the government’s 2023 budget and financial statement at the House of Parliament in Accra.

Contained in the budget is the decision by government to engage in a bilateral agreement with the government of the United Arab Emirates (UAE) in a batter trade on gold and crude oil.

For me, a financial and economic Journalist and analyst, I think it is the best initiative and decision in the 2023 budget that will help ease the pressure on Ghana’s international reserve and earnings.

The policy is expected to fundamentally change Ghana’s balance of payments and significantly reduce the persistent depreciation of the cedi when it starts implementation.

The demand for foreign exchange by oil importers in the face of dwindling foreign exchange reserves usually  results in the depreciation of the cedi and increases in the cost of living with higher prices for fuel, transportation, utilitiesa , According to the Finance Minister Ken Ofori Atta .

The new framework is expected to be fully operational by the end of the first quarter of 2023. A directive from the Finance ministry and the Ministry of Lands and Mineral Resources notes that effective 1st January, 2023, all large scale mining companies (as agreed with the Bank of Ghana)  are mandated to l sell twenty percent (20%) of all refined gold at their refineries to the Bank of Ghana (in Ghana Cedis) before the export of the gold. The Bank of Ghana and the Precious Minerals Marketing Company (PMMC) will coordinate with the large scale mining companies to ensure compliance with this directive.

Besides that Effective 1st January, 2023, all Community Mining Schemes (CMS) shall sell their gold outputs to Government through PMMC. All mining licences for CMS shall include a clause mandating licensees to sell their gold output to Government. In addition, Effective 1st January, 2023, all Licensed Small Scale Gold Miners shall sell their gold to Government through PMMC. All small scale gold mining licences shall include a clause mandating licensees to sell their gold to Government. The gold to be purchased by the Bank of Ghana and the PMMC will be in cedis at spot price with no discounts.These directives would also help local gold refineries obtain gold supplies from PMMC to support their operations as they work toward obtaining the required London Bullion Market (LBMA) certification.

Key Interventions to Address Current Economic Challenges  in 2023

According to the Finance Minister, Ken OforiA-tta,  The present economic challenges requires that Government act with greater urgency to transform the economy through a renewed focus on import substitution and export orientation, to promote job creation while ensuring protection of the vulnerable. Import Substitution and Export Orientation.

Ghana’s heavy dependence on imports places tremendous pressure on the Cedi, thus, creating an unfavourable balance of payments position. On average, Ghana’s import bill exceeds US$10.0 billion annually and is accounted for by a diverse range of items that includes iron, steel, aluminum, sugar, rice, fish, poultry, palm oil, cement, fertilizers and pharmaceuticals.

It is estimated that Ghana currently has the capacity to produce locally, items that account for about 45 percent of the value of imports. These include rice, fish, sugar, poultry, cement and pharmaceuticals, which will be targeted for import substitution by supporting the private sector to increase local production.

Kwabena Adu Koranteng is a Financial and Economic Journalist