The Chamber of Bullion Traders has expressed its reservation about the new initiative rolled out by the Vice President of Ghana, Dr. Mahamudu Bawumia- gold for oil policy, noting that the policy is likely to fail in the long run if it is not handled properly.
This was disclosed by the Chief Executive Officer of Bullion Traders, Mr. Daniel Krampah. According to the CEO, the initiative is likely to breed the smuggling of gold from the country as gold producers will bypass the government to sell the product to other suppliers.
The Chief Executive Officer of Bullion Traders, Ghana indicated that most of the activities of licensed gold exporters are tied to the export trade.
“If the policy is preventing members from sourcing for funds from outside and to export, then basically they are going to be priced out. Because the policy states that everybody should be held to pay their money.
“I don’t have evidence that can support that but the idea was that we were even saying that, why don’t you let us sell a portion of what you buy to the PMMC as how the large-scale mines are doing? So that we continue with the export of the remaining 70% of the whole to our principals who actually finance our operations. We have a lot of refining capacity which is very hungry because as of now we don’t even have gold that we can feed those refineries in the country.”
Mr. Daniel Krampah
Chamber of Bullion Traders Petitions Bawumia
According to Mr. Daniel Krampah, the chamber has presented a petition to Vice President Mahamudu Bawumia in which they explained many reasons why the policy will not be helpful. He also suggested that the government should allow licensed gold exporters to keep a portion of what they buy from small-scale miners to the PMMC in connection to the gold for oil policy.
“We are also saying that if you go along with the policy right now, there will be a lot of gaps in the supply chain. Because as I said PMMC doesn’t have structures in all 13 regions. Currently only in Kumasi where they have set up an office and information from Kumasi says there is not even one personnel in the office as of now. They also said they operate from the Diamond House in Accra here. So, these are some of our concerns. We think that smugglers will take advantage of the system and then cash in and buy the gold that PMMC is not able to buy.”
Mr. Daniel Krampah
The Chamber’s concerns came on the back of the government announcing that Ghana has taken delivery of its first cargo under the gold for oil policy. The delivery is to test the framework if everything that has been put in place will work.
Vice President, Dr. Mahamudu Bawumia assured Ghanaians that the Gold for Oil is expected to push prices of fuel further down after the recent reduction at the pumps.
The move by the government is meant to tackle dwindling foreign currency reserves coupled with the demand for dollars by oil importers, which is weakening the local cedi and increasing living costs.
Ghana’s Gross International Reserves stood at around $6.6 billion at the end of September 2022, equating to less than three months of imports cover. That is down from around $9.7 billion at the end of last year, according to the government.
However, the proposed policy is uncommon. While countries sometimes trade oil for other goods or commodities, such deals typically involve an oil-producing nation receiving non-oil goods rather than the opposite.
Ghana produces crude oil, but has relied on imports for refined oil products since its only refinery shut down after an explosion in 2017.
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