Letter: Ghana’s plan to swap gold for oil has implications for the dollar

David Pilling highlights clearly the inadequate measures Ghana’s government is enacting to shore up its finances (“Ghana’s rude awakening as tide of cheap money recedes”, Opinion, December 2).

As he suggests, the country finds itself in the classic emerging market trap — owing too much in someone else’s currency when the global economic tide turns.

Another policy which the country is about to employ is ordering large-scale mining companies to sell 20 per cent of their stocks of refined gold to the government from January 2023, presumably in exchange for the country’s own depreciated currency. It appears that the plan is to use bullion as a means of payment for oil imports.

One ought not to infer too much from one small country getting creative with money (the same could be said for El Salvador and its recent adoption of bitcoin as a reserve asset), nor to confuse the confiscation of private assets with a more conventional process of fiscal retrenchment of the sort that would gain IMF approval.

If however Ghana’s problems are reflective of a wider issue of global dollar reliance, it is interesting in itself that Ghana is looking at a gold-for-oil swap to help its economy, since this suggests that gold is being used for its money-like qualities in a way that has seemed unfashionable for much of the past 50 years.

When one looks at this in the light of recent data from the World Gold Council suggesting that the third quarter of 2022 saw the highest level of gold purchases in decades by global central banks, one wonders if this portends moves afoot in the world, if not to replace the dollar as the world’s reserve currency, at least to chip away at its dominance at the fringes, with all the geopolitical implications that comes with this.

Charles Crowson
London W9, UK