John Philpot, an international human rights attorney from Montreal, Canada, has commended Ghana’s ‘gold-for-oil’ strategy, which Vice President Dr. Mahamudu Bawumia recently developed and put into action.
Philpot, who has extensive knowledge of international politics pertaining to the continent and has previously lived in Africa, said Ghana’s decision is a courageous as well as the appropriate step because it would stop currency depreciation and stabilize prices.
He continued by predicting that other other nations would soon adopt a similar policy.
“The U.S dollar is having a lot of inflation so..it has less value because of the inflation…Gold is more of a universal value and they (Ghana) are doing this to internally avoid the devaluation of their currency and I think this is going to be a tendency worldwide,” Philpot said during an interview with Press TV Iran.
Philpot explained that countries in Africa are always on the losing side due to their currencies depreciating against the U.S. dollar, which in turn has an effect on the local economy. This leads to price hikes and makes the local currency worth even less.
“It would appear that [the policy] will avoid poverty and stabilise prices because countries in Africa, their money is pegged to the U.S dollar. Prices go up much faster and the money is much less value for the people working in the salaries of those countries. I lived in Tanzania…people I know living on Tanzanian salaries were having a very hard time. This [gold for oil policy] will stabilise prices,” he said.
He said Ghana’s move is a “return to multilateral approach and obviously having better relations with Russia and China and other countries too…The United Nations was built on the concept of sovereignty. You are not sovereign if the U.S. dollar controls your economy so if they get a form of universal or more democratic trade, it increases your sovereignty.”
Vice President Dr Mahamudu Bawumia announced recently that Ghana would kick off a policy of using gold reserves to purchase refined crude productsfrom the world market from 2023 rather than using the U.S. dollar.
In a speech delivered at the 2022 Ghana Energy Awards held the night of Sunday, November 27th, the Vice President said the move is aimed at stopping the cedi’s depreciation and its attendant effects on the local economy.
“A major source of cedi depreciation has been the demand for foreign exchange to finance the import of oil products…Persistent cedi depreciation increases the cost of living with higher prices for fuel, transportation, utilities, food and so on,” Bawumia said.
““…To address this fundamental challenge of the persistent depreciation and its impact on fuel, utility prices, food and so on, government has decided to implement a policy of using our gold to buy oil products. That is something new and it is the barter of sustainably mined gold for oil and is one of the most important policy changes in Ghana since independence. If we implement it as we have envisioned, it will fundamentally change our balance of payments and significantly reduce the persistent depreciation of our currency with its associated increases in fuel, electricity, water, transport and food prices,” he added.
In a similar move, the reserve bank of Zimbabwe introduced gold coins into the market in July this year amidst rising inflation and rapid depreciation of the local currency.
The introduction of the gold coins was part of the Central Bank’s measures to tackle the country’s currency crisis through exchange rate stabilisation.