He said the most important aspect of the policy was not just the reduction in fuel prices but the savings the Bank of Ghana (BoG) would make in foreign exchange (forex) as a result of lower demand.

Dr Bawumia, who was speaking at the inauguration of the new office building for the Bulk Oil Storage and Transportation Company Limited (BOST) in Accra yesterday, said the savings were huge, and that the goal was to move the importation of oil under the policy from between 50 and 60 per cent to 100 per cent this year.

“We will work with the bulk distribution companies (BDCs) to make this happen, but the savings in forex, when we do this, will be an annual saving of around $4.8 billion,” he said.

The Vice-President said when the country was able to execute the policy to the letter, it would mean that the oil importing companies would not be going to the BoG to look for $4.8 billion to buy oil, adding: “We will buy gold with our cedis, convert it into the oil payment and, therefore, that demand will no longer be there.”

He indicated to Ghanaians to understand that the prices of fuel would go up and come down, but what the government expected to see under the Gold-for-Oil policy was stability in the pricing, as well as savings on forex.

While expressing optimism over the prospects of the policy, Dr Bawumia said it had been either deliberately or unintentionally misunderstood by many, hence the need to shed light on it for people to understand what was being done, for which BOST was playing a very critical role.

He indicated that the major balance of payment challenge which led to the dwindling forex reserve at the central bank called for an intervention.

He cited similar crises in Sri Lanka and Kenya and said Ghana was faced with a very critical situation because it did not have enough foreign exchange reserve to meet that persistent demand.

“So we had to think outside the box, outside the textbook to see how we prevent Ghana from getting to the situation where we are unable to buy fuel, unable to power our generating plants, among others, which run on fuel,” he pointed out.

Explaining further, he said when the price of diesel reached GH¢23 per litre, the country did not have forex to support any further purchases, but it had gold, “and gold is a foreign reserve asset”.

The Vice-President said instead of waiting to export the gold to earn forex, the country decided to dig up the gold and use it as forex.

“Therefore, we do not need forex to go and buy the oil directly; we can use our cedis to buy the gold, use the gold to transform it either directly by barter or transform it into dollars and then pay for the oil which will be supplied and sold by the oil marketing companies (OMCs),” he explained.

“This is just a simple framework of the Gold-for-Oil policy; by so doing, we are able to get a hold on this rampant increases in the prices of fuel and also in the exchange rate,” he added.

He described the policy as the first of its kind in the country since independence to address that type of balance of payment crisis facing the country.

He opined that “it is the most important macroeconomic policy intervention to deal with the exchange rate depreciation and the fuel and food price inflation nexus that we have had”.

Vice-President Bawumia further indicated that the policy had not only brought about a decline in ex-pump prices from GH¢23 per litre of diesel to around GH¢12 per litre, but “we have also seen stability in the exchange rate, as we predicted”.

Fuel prices

He further announced that the country would experience a reduction in the prices of fuel from today.

Dr Bawumia commended all the stakeholders, such as the Ministry of Energy, BOST, the National Petroleum Authority (NPA), the BoG, the Ministry of Lands and Natural Resources and the Precious Minerals Marketing Company (PMMC), which he said rose to the occasion when the country was confronted with the crisis of a rapidly depreciating currency, along with rapidly increasing fuel and transportation costs, as well as food prices.