Former Vice President Dr Mahamudu Bawumia has explained, in detail, the circumstances that led him to introduce the Gold-for-Oil and Gold-for-Reserves programmes while he was in office.

Speaking in Accra to members of the Ghana Small-Scale Miners Association, Dr Bawumia said two interlinked challenges forced him to “think outside the box” for sustainable solutions to Ghana’s economic difficulties.

The first, he explained, was the sudden halt in external financing following the impact of the COVID-19 pandemic and the Russia-Ukraine war on the global economy.

“That tap (external financing) was shut for Ghana and quite a few countries. And for us, it resulted in a balance of payments crisis,” he said.

The second challenge, he noted, was the conditions attached to Ghana’s IMF programme. According to Dr Bawumia, one of the conditions restricted the Bank of Ghana to using a maximum of $80 million per month to intervene in the foreign exchange market.

“You can imagine what the demand for foreign exchange for Ghana would be on a monthly basis. Significantly more than $80 million a month. And so, in that framework, there was only one result. Because when demand exceeds supply, prices would go up, isn't it? The cedi started depreciating daily,” he said.

He explained that the Gold-for-Oil programme was conceived as a way of bypassing the dollar constraint by using gold to secure fuel supplies, thereby helping to prevent shortages and reduce pressure on the country’s limited foreign exchange reserves.

Dr Bawumia said the idea for the Gold-for-Reserves programme came to him while he was exercising. He questioned why Ghana, which produces gold domestically, had to rely on exporting other commodities to generate dollars for its foreign exchange reserves.

“Why does Ghana, which mines gold every day, have to export cocoa to get dollars for its forex reserves? Why not buy the gold we already produce with cedis?” he asked.

He described the approach as “out-of-the-box thinking”, stressing that it was not a conventional economic policy.

“It was not a textbook idea. There's no textbook in economics that will tell you about the Gold-for-Reserves programme,” he said.

According to Dr Bawumia, he subsequently presented the idea to the Bank of Ghana, which took nearly a year to conduct due diligence because of the unconventional nature of the proposal.

He said officials were initially concerned about the potential risks of implementing a policy that had no established precedent.

“Finally, they agreed, and Ghana became the first country in Africa, and probably the world, to implement such a programme. Now, other countries are coming to learn from Ghana,” he said.