The government of Ghana intends to use gold to buy oil from next year, 2023.
This was announced by Vice President Mahamudu Bawumia on his Facebook page.
“As part of measures to operationalise the government’s use of gold to purchase oil products, the Minister of Lands and Natural Resources, Mr Samuel A. Jinapor has just issued the following directives”, wrote the Vice President.
The directives include:
1. Effective 1 January 2023, all large-scale mining companies (as agreed with the Bank of Ghana) shall sell twenty per cent (20%) of all refined gold at their refineries to the Bank of Ghana (in Ghana cedis) before the export of the gold. The Bank of Ghana and the Precious Minerals Marketing Company (PMMC) will coordinate with the large-scale mining companies to ensure compliance with this directive.
2. Effective 1 January 2023, all Community Mining Schemes (CMS) shall sell their gold outputs to the government through PMMC. All mining licences for CMS shall include a clause mandating licencees to sell their gold output to the government.
3. Effective 1 January 2023, all licensed small-scale gold miners shall sell their gold to the government through PMMC. All small-scale gold mining licences shall include a clause mandating licencees to sell their gold to the government.
4. The gold to be purchased by the Bank of Ghana and the PMMC will be in cedis at a spot price with no discounts.
The directives, according to the Vice President, would also help local gold refineries obtain gold supplies from PMMC to support their operations, as they work toward obtaining the required London Bullion Market (LBMA) certification.
The move is part measures to stem the depreciation of the Ghana cedi against the dollar and other currencies of international trade.
The cedi has, so far, lost 53.8% in value since the beginning of the year 2022, Finance Minister Ken Ofori-Atta told parliament when he read the 2023 budget on Thursday, 24 November 2022.
“The demand for foreign exchange to support our unbridled demand for imports undermines and weakens the value of the cedi”, he told the house.
“This contributed to the depreciation of the cedi which has lost about 53.8% of its value since the beginning of this year, compared to the average 7% annual depreciation of the cedi between 2017 and 2021”, Mr Ofori-Atta noted.
The minister also said external sector performance in the outlook will “depend largely on the quick resolution of the Russia–Ukraine war and the outcome of recession fears in advanced economies”.
“The thrust of the external sector will focus on rebuilding external buffers enough to cover, at least, three-and-a-half months of imports of goods and services to cushion the economy against adverse external shocks”.
“This will be underpinned by, among others, bilateral support, and strong remittance inflows”, he noted.
The finance minister also revealed that Ghana’s debt stock shot up by GH¢93 billion this year as a result of the depreciation of the cedi.
“Mr. Speaker, provisional debt data as at the end of September 2022 shows a significant increase in Ghana’s public debt largely due to exogenous factors”.
“The end–September 2022 provisional figures indicate that total gross public debt stood at GH¢467,371.31 million (US$48,871.34 million), representing approximately 75.9 percent of GDP.”
“The domestic debt component is GH¢195,657.60 million, which is 31.79 percent of GDP, whilst external debt is GH¢271,713.71 million, representing 44.15 percent of GDP”. “The increase in the domestic debt is largely on account of rising interest costs”.
“Domestic debt as a share of total public debt reduced from 51.6 percent in 2021 to 41.9 percent as at end of September 2022”.
“Mr. Speaker, the external debt as a percentage of the total debt stock is 58.1 per cent as at end of September 2022”.
“The sharp growth in the external debt stock is largely driven by the depreciation of the local currency”. “The depreciation of the Ghana cedi added GH¢93,855.15 million to the external debt stock.”
Read the full budget below:
2023 BUDGET STATEMENT 1
2023 BUDGET SPEECH Introduction 1.
Right Honourable Speaker, Honourable Members of Parliament, on the authority of the President of the Republic of Ghana, and in accordance with the requirement under Article 179 of the 1992 Constitution of the Republic of Ghana, I present to you the 2023 Budget Statement and Economic Policy of His Excellency Nana Addo Dankwa Akufo-Addo.
2. Mr. Speaker, I beg to move that this House approves the Budget Statement and Economic Policy of the Government of Ghana for the year ending 31st December, 2023.
3. I also respectfully submit to this House the following statutory reports: ● The 2022 Annual Report on the Petroleum Funds, pursuant to Section 48 of the Petroleum Revenue Management Act, 2011 (Act 815), (as amended); and
● The 2022 Report on the Utilisation of the African Union Levies, pursuant to Section 7 of the African Union Import Levies Act, 2017 (Act 952).
4. Mr. Speaker, this Budget Speech is an abridged version of the 2023 Budget Statement and Economic Policy of Government.
I request the Hansard Department to capture the entire Budget Statement and Economic Policy of Government for the year ending 31st December, 2023. 5. Mr. Speaker, at the outset, permit me to thank you, personally, the leadership of Parliament, Honourable Members of this august House for your individual and collective support, understanding and cooperation the past six years that I have had the honour and privilege to be the Minister responsible for Finance.
6. As we all are fully aware, a lot has happened this year in the economy and more so in recent weeks over my role in the management of the economy.
These are very erratic times and, on behalf of the President of the Republic and, for myself in particular, I am eternally grateful, first, to the leadership of the New Patriotic Party, and the majority leadership and caucus of this House.
And, to the Minority caucus of the National Democratic Congress in Parliament, I thank you, on your decision yesterday to participate fully in the process of passing this budget and, to quote, you stressed how “also mindful” you are “of the timeliness regarding the IMF negotiations and the crucial role a timely presentation of the 2023 budget will play in the advancement” of Ghana’s case in the negotiations with the Fund. 7. I wish to assure this House of my strong commitment and unflinching cooperation in our collective efforts to secure an historic IMF programme very soon; a programme that will assist the country in its post-covid recovery efforts.
Our disagreements notwithstanding, what should never be in doubt, especially in the eyes and ears of the general public, is our common desire to serve the Republic. Our democracy is richer for it.
Let me quote Simón Bolíva;
“In the unity of our nations rests the glorious future of our peoples.”. 8. But Mr. Speaker, The President of the Republic who is in Qatar enjoins us to remember Nehemiah when he said ‘Let us rebuilt the walls of Jerusalem and we will in disgrace.
They replied “Let is start rebuilding”. So they began to work.
9. Mr. Speaker, the year 2022 will go down as one of the most difficult and eventful years in the economic history of our country.
While we continue to deal with the devastating impact of the COVID-19 pandemic which led to significant reduction in our revenues and increased our expenditures enormously, we also have had to contend with the double jeopardy of the Russian-Ukraine war. What has resulted in unprecedented global crises ravaging all currencies and historic living and inflation levels
10. In the midst of these really challenging times, Parliament has in many, many instances supported Government’s programmes presented to this House.
The eventual passage of the E-levy Act, the Fees and Charges Act, the Exemptions Act and the US$750 million Afrexim Loan, among others, attest to the support received from this august House.
At the same time, the exceptional challenges that the Electronic Levy bill encountered months before it was passed, also attest to the challenges that we must be mindful of going forward. 11. Mr. Speaker, I also wish to express the deep appreciation of Government to the various stakeholders, including Employers’ Associations, Labour Unions, Civil Society, Faith-Based Organizations, Association of Ghana Industries, Ghana Union of Traders Association, Bankers, Academia and Think-Tanks for the support we have received throughout the year, as well as the inputs that have informed and enriched our policy choices. It is, Mr Speaker, when God’s people live together in unity- the Lord bestows His blessings.
A CHALLENGING YEAR
Mr. Speaker, a year ago, I came to present a Budget with significant revenue measures to tackle our fiscal difficulties, finance the transformative agenda of Government and sustain the post COVID-19 recovery. However, what started as a political disagreement over revenue measures in this House, triggered a series of events that significantly undermined the credibility of our budget, consequently leading to serious economic challenges, as investor confidence hit a new low.
13. This manifested in credit rating downgrades which triggered the closure of Ghana’s access to the International Capital Market; tightening domestic financing conditions; and increasing cost of borrowing. The combined effects of the developments contributed to the rapid depreciation of the cedi and compounded the high debt service levels.
14. Mr. Speaker, our inability to access the International Capital Markets meant that, for the first time in our administration, we did not have the needed foreign currency to complement our forex earnings. ]
We have had to make strenuous efforts to meet our import bill, which exceeds US$10.0 billion annually.
Considering our low foreign earnings, it has been difficult to meet our import requirements including crude oil and petroleum products of about US$400m (GHc4.80 billion) a month. At the same time, Ministry of Finance still needs to find about US$1.0 billion annually to keep our lights in our homes and workplaces.
15. Mr. Speaker, the demand for foreign exchange to support our unbridled demand for imports undermines and weakens the value of the cedi.
This contributed to the depreciation of the cedi, which has lost about 53.8 percent of its value since the beginning of the year.
Compared to the average 7 percent average annual depreciation of the Cedi between 2017 and 2021, the current year’s depreciation, which is driving the high costs of goods and services for everyone, is clearly an aberration – a very expensive one. 16. The increases in fuel prices (Diesel currently GHS20.5 and Petrol GHS16.8) has led to increases in prices of most goods and services.
Inflation which we managed to bring down from 15.4 percent at the end of 2016 to 7.9 percent at the end of 2019 and remained in single digits till the pandemic hit in March 2020 is now 40.4 percent.
17. It is not only the individuals and households who are adversely affected by the depreciation of the cedi. For us at the Ministry of Finance, the depreciation of the cedi seriously affects our ability to effectively manage our debt.
Indeed, our stock of debt has increased by GHc93 billion this year alone due to the depreciation of the cedi since the beginning of 2022. Even as the State struggles to raise sufficient revenues, high inflation rates continue to eat away the already meagre wages of the average Ghanaian.
The lesson from this relapse in macro-economic stability makes us even more determined, as your government, to permanently restructure and transform this economy and build resilience.
18. Mr. Speaker, we have been honest with Ghanaians about the economic challenges that the country is facing. H.E. The President pointed out that, never have so many malevolent forces come together, in a perfect storm, to so dramatically impact our lives. The current challenges on the back of two difficult years, since March 2020, have really tested our people and our resolve.
We empathize greatly with all Ghanaians for the undue pressures this has placed on their livelihoods. We want to commend all of you for your forbearance during these difficult times.
We are confident that together, and with God on our side, we will turn things around.
19. On behalf of His Excellency the President, let me assure all Ghanaians that Government is working to change this negative narrative and demonstrate our resilience as a people and our ability to rebuild for a better future.
We have demonstrated this many times in our country, but more recently between 2017 and 2019. We are resolved that in the next two years, Government would work with you all, with a restless determination, to turn around this economy. 20. Mr. Speaker, in a few hours, the Black Stars will be playing their first game in the 2022 FIFA World Cup tournament in Qatar.
It is clear that we stand united as a nation behind our Black Stars.
A successful passage of the 2023 budget, a successful conclusion of negotiations with the IMF; and, making Ghana’s performance in Qatar 2022, the most successful that is winning the Cup not only for the country but for any African side on the World Cup stage, will, I dare say, bring this most challenging year to a very successful end.
To this, Mr Speaker, we pray. As the bible says ‘behold How good and pleasant it is when God’s people live together in unity! ……… for there, the Lord commands the blessing” Psalm 133 verse 1-3 Resetting Our Economy 21. Mr. Speaker, events since March 2020 have taught us the pervasive volatility of our world today and the wisdom in the vision of President Akufo-Addo to reset our economy through industrialisation.
This budget reflects our resolve to reset the economy and restore macroeconomic stability. But, to do so, we need the support of the people of Ghana and the cooperation and approval of this Parliament.
Our goal now is to significantly enhance revenues, significantly cut down the cost of running government, significantly expand local production, invest more to protect the poor and vulnerable, continue expanding access to good roads, education and health for every Ghanaian everywhere in Ghana and the diaspora.
22. Mr. Speaker, this Budget is, therefore, anchored on a seven-point agenda aimed at restoring macro-economic stability and accelerating our economic transformation as articulated in the Post-COVID-19 Programme for Economic Growth (PC-PEG). These comprise an agenda to:
i. Aggressively mobilize domestic revenue;
ii. Streamline and rationalise expenditures; iii. Boost local productive capacity;
iv. Promote and diversify exports; v. Protect the poor and vulnerable;
vi. Expand digital and climate-responsive physical infrastructure; and
vii. Implement structural and public sector reforms.
23. To achieve these, there are three (3) critical imperatives: successfully negotiating a strong IMF programme; coordinating an equitable debt operation programme; and attracting significant green investments. This will enable us to generate substantial revenue, create needed fiscal space for the provision of essential public services and facilitate the implementation of the PC-PEG programme to revitalise and transform the economy.
24. Mr. Speaker, we will undertake the following actions, initiatives, and interventions under the seven-point agenda.
● To aggressively mobilize domestic revenue, we will among others:
Increase the VAT rate by 2.5 percent to directly support our roads and digitalization agenda; Fast-track the implementation of the Unified Property Rate Platform programme in 2023; and Review the E-Levy Act and more specifically, reduce the headline rate from 1.5% to one percent (1%) of the transaction value as well as the removal of the daily threshold.
● To boost local productive capacity, we will among others:
