The Ghanaian government has announced that it will begin utilising gold, instead of dollars, to purchase oil products in order to address the issue of the country’s declining foreign exchange reserves.

Ghana’s vice president, Mahamudu Bawumia, made this announcement in a Facebook post on Thursday. He added that the decision was made to meet the rising dollar demand from oil importers, which has significantly devalued the local currency and raised living costs.

The vice president claimed that using gold would prevent the exchange rate from immediately affecting the price of fuel or utilities because domestic vendors would no longer need foreign money to import oil items.

“The demand for foreign exchange by oil importers in the face of dwindling foreign exchange reserves results in the depreciation of the cedi and increases in the cost of living with higher prices for fuel, transportation, utilities, etc. 

“To address this challenge, the Government is negotiating a new policy regime where our gold (rather than our US dollar reserves) will be used to buy oil products. The swap of sustainably mined gold for oil is one of the most important economic policy changes in Ghana since its independence,” the Facebook post partly read.

He explained that if the new policy is put into place, it will fundamentally alter the balance of payments and greatly lessen the ongoing currency depreciation, which has led to increases in the costs of fuel, power, water, transportation, and food.

 “This is because the exchange rate (spot or forward) will no longer directly enter the formula for the determination of fuel or utility prices since all the domestic sellers of fuel will no longer need foreign exchange to import oil products,” he added.

This announcement comes a few weeks after a Blomberg report ranked the country’s currency alongside the Nigerian naira as the world’s two worst-performing currencies, with the naira losing 37 per cent of its value against the dollar and the cedi losing 55 per cent.

In October, the Ghanaian cedi was rated as the worst performing currency in the world after it lost 45.1 percent of its value to the U.S. dollar this year.