The Director of Research at the Institute of Economic Affairs (IEA) Dr John Kwakye has shared his views on the gold for imported oil new policy by the government.
The Vice President Dr Mahamudu Bawumia, has revealed a remarkable new policy by government that would see the government pay for imported oil products with gold rather than through US Dollars.
Revealing the policy in a post on his Facebook page on Thursday, Vice President Bawumia said the policy is expected to take effect by the end of the first quarter of 2023.
He said in a Facebook post that “The Use of Gold To Buy Imported Oil Products
“The demand for foreign exchange by oil importers in the face of dwindling foreign exchange reserves results in the depreciation of the cedi and increases in the cost of living with higher prices for fuel, transportation, utilities, etc. To address this challenge, Government is negotiating a new policy regime where our gold (rather than our US dollar reserves) will be used to buy oil products. The barter of sustainably mined gold for oil is one of the most important economic policy changes in Ghana since independence.
“If we implement it as envisioned, it will fundamentally change our balance of payments and significantly reduce the persistent depreciation of our currency with its associated increases in fuel, electricity, water, transport, and food prices. This is because the exchange rate (spot or forward) will no longer directly enter the formula for the determination of fuel or utility prices since all the domestic sellers of fuel will no longer need foreign exchange to import oil products.
“The barter of gold for oil represents a major structural change. My thanks to the Ministers for Lands and Natural Resources, Energy, and Finance, Precious Minerals Marketing Company, The Ghana Chamber of Mines and the Governor of the Bank of Ghana for their supportive work on this new policy. We expect this new framework to be fully operational by the end of the first quarter of 2023.”
Sharing his views on this, Dr John Kwakye said in a tweet that “This is mere window dressing and will not address the perennial depreciation of the cedi.
“The viable option is to restructure the economy and continually increase the foreign exchange cover for the currency issue.”
“I don’t get the rationale of this policy at all. To me, gold is as good as forex. So, whether we use gold or forex to purchase oil, we’ll be depleting our reserves and the pressure will be back on the cedi.”
Director of Research at the Institute of Economic Affairs (IEA) Dr John Kwakye has said all ministers who are resigning or being sacked should be made to declare their assets and compare to what they declared when they were appointed.
Dr Kwakye asked the Office of the Special Prosecutor (OSP) to ensure that that is done.
“All those resigning from office or being sacked must be made to declare their assets before they leave and this must be compared with the declaration when they assumed office. OSP, over to you,” Dr Kwakye tweeted.
All those resigning from office or being sacked must be made to declare their assets before they leave and this must be compared with the declaration when they assumed office. OSP, over to you!
The OSP earlier announced in a statement signed by the Special Prosecutor Mr Kissi Agyebeng on Tuesday November 15 that, it has commenced in investigations to the alleged corruption by the sacked Minister of State at the Finance Ministry Charles Adu Boahen.
The statement said “The Office of the Special Prosecutor has promptly commenced investigations into the action of Mr Charles Adu Boahen and any other implicated persons contained in the investigative exposé, ”Galamsey Economy’.”
“The President of the Republic, Nana Addo Dankwa Akufo-Addo, has terminated the appointment of the Minister of State at the Ministry of Finance, Mr. Charles Adu Boahen, with immediate effect.
“After being made aware of the allegations levelled against the Minister in the exposé, ‘Galamsey Economy’, the President spoke to Mr. Adu Boahen, after which he took the decision to terminate his appointment, and also to refer the matter to the Special Prosecutor for further investigations.
“The President thanked Mr. Adu Boahen for his strong services to his government since his appointment in 2017, and wished him well in his future endeavours,” a statement issued by the Director of Communications at the Presidency, Mr Eugene Arhin said on Monday November 14.
A Government Communicator Kofi Tontoh said the principle of natural justice will play out properly when Adu Boahen gets his day before the OSP to answer allegations of corruption made against him.
Mr Tontoh stated that investigations by the OSP will determine the next action to be taken against him.
Commenting on this matter, Mr Tontoh said on the Big Issue on TV3 with Berla Mundi on Tuesday November 15.“This is a decisive decision by the President.”
He added “It is an attempt to show that the President doesn’t condone corruption but let us allow Adu Boahen to have his day and ones all the facts come out if any further action is needed it will be taken.”
The Director of Research at the Institute of Economic Affairs (IEA) Dr John Kwakye has indicated that financial indiscipline is what is causing high inflation and also drop in the strength of the Cedi.
He noted that as the Central Bank continues to monetize the deficit through direct advances to government and takeover of maturing Treasury Bills, it must ensure that it is not breaching the lending ceiling and fiduciary currency issue.
“Fiscal and monetary indiscipline is fueling inflation and cedi depreciation. While we expect the Treasury and the Central Bank to collaborate positively, they are rather collaborating negatively as the former has been compelling the latter to monetize the deficit,” he tweeted.
His comments come at a time Bolga Central MP Isaac Adongo has accused Governor of the Bank of Ghana (BoG) of illegally giving an amount of ¢70 billion to the government to finance matured debts.
The Deputy Ranking Member on the Finance Committee has served notice to sue Dr Addison over the matter.
Addressing a press conference in Parliament on Tuesday November 8, he said “Ask yourself why the same taxes that we imposed on petroleum products two years ago to deliver a liter of 4. 50 pesewas.
“So essentially, now the problem is not even about the taxes, it is about the exchange rate. Who is supposed to manage the exchange rate? It is the Governor of the central bank Dr Addison.”
He added “Another big problem we have now is inflation. The Bank of Ghana manages the inflationary target framework whiles the Ghana Statistical service reports actually but the man who is in charge of managing our inflation targeting framework and ensuring that inflation expectations are anchored, is the Governor of the Central Bank.
“The inflationary targeting framework within the confines of the Bank of Ghana provided very strict rules on what we call fiscal governance over monetary policy, in other words there are strict rules on the government of Ghana can borrow from the Bank of Ghana.
“Those restricted rules are quite clearly stated that the BoG at any point in time should not have lent more than five percent of the previous revenue cumulatively. If you consider last year ‘s revenue then the government cannot even borrow five million Cedis from the BoG.
“But by the end of the year 2021, Dr Addison has illegally lent to government ¢35billion, and by May this year he had added an additional ¢22billion when the Minister came at Mid year review. As we speak today, Dr Addison has been financing government and paying maturing debt obligations the domestic market that the government cannot find, we are currently looking at something in excess of 7billion of illegally borrowing by the Government of Ghana from the BoG.
“If you have a corrupt government such as Akufo-Addo and Dr Bawumia and you pump 70billion to the economy that does not belong to the economy, they steal them and they put them in their rooms under their beds.
“Under the current circumstance, the best storage of money is Dollars and not Cedis. So Dr Addison’s 70 billion are now in the homes and beds of government functionaries, is what is chasing the Dollar.
“How can Dr Addison still be the Governor of the Central bank? I call on Dr Addison as a matter of urgency, to exit BoG and give Ghana the chance to clear the mess. Today, I have instructed my lawyers to serve him notice and to remind him again of a letter I served him, that if by the end of the third meeting of the second sitting of the 8th Parliament, he has not complied with his obligation to parliament for us to exercise our oversight role, I will sue him and I will proceed to court.”
Nationally Determined Contribution, is a climate action plan to cut emissions and adapt to climate impacts.
According to the latest World Meteorological Organization (WMO) report, a lack of recognition has resulted in a lack of demand and finance.
Climate adaptation investments in the energy sector continue to be extremely low, totaling slightly more than $300 million per year in 2019-2020.
The current pledges made by countries, according to the report, fall far short of what is required to meet the Paris Agreement’s objectives of limiting global warming to well below 2 degrees Celsius, leaving a 70% gap in the amount of emissions reductions required by 2030.
It also stated that the 3.7 TW pledged from renewables in the 56% of NDCs with quantified renewable power targets in 2030, if implemented, would be less than half of what is needed to keep the 2 °C goal alive. To meet the long-term global temperature goal set by the Paris Agreement, 7.1 TW of clean energy capacity must be installed by 2030.
According to the World Bank, the necessary policies and regulations to enable energy decarbonisation to remain particularly weak in Africa, South America, and Asia. Only 6% of NDCs mention climate services for energy mitigation.
The energy sector is the largest source of GHG emissions, accounting for nearly three quarters of global emissions, as countries have been urged to make a concerted effort to transition to low-carbon energy.
CO2 concentrations reached 149% of pre-industrial levels in 2020, according to the International Energy Agency (IEA), and supply from low-emissions sources must double by 2030 if the world is to reach net zero by 2050. Total energy supply is expected to decline by 7% to 50% (up to 65%).
It also stated that the 3.7 TW pledged from renewables in the 56% of NDCs with quantified renewable power targets in 2030, if implemented, would be less than half of what is needed to keep the 2 °C goal alive. To meet the long-term global temperature goal set by the Paris Agreement, 7.1 TW of clean energy capacity must be installed by 2030.
According to the World Bank, the necessary policies and regulations to enable energy decarbonisation to remain particularly weak in Africa, South America, and Asia. Only 6% of NDCs mention climate services for energy mitigation.
The energy sector is the largest source of GHG emissions, accounting for nearly three quarters of global emissions, as countries have been urged to make a concerted effort to transition to low-carbon energy.
CO2 concentrations reached 149% of pre-industrial levels in 2020, according to the International Energy Agency (IEA), and supply from low-emissions sources must double by 2030 if the world is to reach net zero by 2050. Total energy supply is expected to decline by 7% to 50% (up to 65%).
According to the IEA, low-emission energy sources will account for 16% of total energy supply by 2030, a significant increase from the current level of around 25%.
“A transition to renewable energy, therefore, constitutes an essential contribution to alleviating growing global water stresses.”
Because renewable energy systems are weather and climate dependent, the report calls for improved climate information and energy sector services.
“Climate services are needed to ensure the resilience of energy systems to climate-related shocks and to inform measures to increase energy efficiency. Risk assessments addressing planning and early warning of adverse events affecting energy supply and demand can help populations to anticipate, absorb, accommodate and recover from adverse impacts.
For example, early weather warnings can safeguard energy supply in Beijing (China), climate stress tests can ensure effective electricity distribution in the Dolomites region of Italy, and severe weather warnings can protect offshore wind power production in China.
Climate services are also essential for renewable energy, including for site selection, resource assessment and financing; operations, maintenance and management of energy systems; electricity integration into the grid; and impact assessment of energy systems.”
According to the Climate Policy Initiative (CPI), a significant increase in annual energy investment from just over US$ 2 trillion globally to nearly US$ 5 trillion by 2030 is required for a radical transformation of the global energy system. Current levels of investment in renewable energy must also at least triple in order for the world to achieve net zero emissions by 2050.
The majority of renewable energy investments in 2019-2020 were made in East Asia and the Pacific region (primarily in China and Japan), followed by Western Europe and North America (primarily in the United States and Canada).
According to the International Renewable Energy Agency (IRENA) and the CPI, developing and emerging economies continue to be underrepresented in terms of access to clean energy finance.
“Further, only two percent of such investment in the last two decades was made in Africa. International public financial flows to developing countries in support of clean energy decreased in 2019 for the second year in a row, falling to US$ 10.9 billion. This level of support was 23% lower than the US$ 14.2 billion provided in 2018, 25% lower than the 2010–2019 average, and less than half of the peak of US$ 24.7 billion in 2017,” the report captured.
Africa currently accounts for less than three percent of global energy-related CO2 emissions and has the lowest emissions per capita of any region.
With increasing flows of climate finance, global ambitions for reducing emissions with declining clean technology costs hold new promise for Africa’s future. Achieving Africa’s energy and climate goals will require more than doubling energy investment this decade, as well as a significant increase in adaptation.
According to the World Meteorological Organization’s most recent report, African countries have the lowest percentage of modern renewable systems, accounting for only 7.6% of total energy consumption, and Africa has received only 2% of global investments in renewable energy over the last two decades. Nonetheless, the continent has enormous resource potential, especially for solar energy systems, but also for wind and hydropower.
The region also has enormous potential for solar energy system deployment: Africa has 60% of the world’s best solar resources but only 1% of installed photovoltaic (PV) capacity.
According to the IEA, providing access to modern energy for all Africans requires an annual investment of US$ 25 billion, or about 1% of global energy investment today.
According to the IEA’s Net Zero Emissions by 2050 Scenario (NZE), by 2050, renewable energy will meet the majority of global electricity needs, with solar being the single largest source of supply in terms of installed capacity. African countries have the potential to be major market players.
Since 2019, WMO has published annual reports on the state of climate services in order to provide scientifically based information to aid in climate adaptation and mitigation.
This year’s WMO State of Climate Services report focuses on energy, a topic that continues to dominate discussion and debate because it affects every single community, business, sector, and economic sector around the world.
The report calls for more effective climate services to help create appealing market conditions, expand renewable energy infrastructure, and promote clean energy system efficiency and climate resilience.
The government and the Bank of Ghana (BoG) must collaborate to address the factors causing inflation to rise, the Institute of Economic Affairs (IEA), has said.
According to the economic think tank, the current inflation rate of 33.9 per cent in August 2022 was largely driven by supply and cost factors, particularly food, fuel, transport, and exchange rate.
In a statement issued by the IEA in Accra on Monday and copied to the Ghanaian Times, it said the “supply and cost factors fueling inflation should be directly targeted with appropriate policy interventions.”
Inflation for diesel in August stood at 116.9 per cent, petrol was 80.5 per cent, and transport inflation (embedding fuel costs) stood at 45.7 per cent, imported and food 34.4 per cent.
IEA called for subsidies on basic staples and reinforcement of measures to ensure that food stocks were easily transported from farm gates to markets.
“Also reduction of fuel taxes or levies and the use of part of Government’s windfall gains from higher oil prices to cushion pump-prices, while expanding public transport and subsidising fares to cushion the masses,” it said.
Further, IEA urged the BoG to enforce the foreign exchange laws, including relating to forex carry-on limits for travellers, forex trading, pricing of goods and services in forex and forex transfers through banks.
“We call on the BoG and the government to work to adopt additional targeted measures to fight the inflation crisis and also negotiate with foreign companies to stagger repatriation of their dividends and profits to reduce pressure on the exchange rate” it stated.
IEA said in countries, including major economies where inflation, tended to be mostly demand-driven, a more appropriate tool such as Inflation Targeting had resorted to interventions directed to the supply factors.
The economic think tank said some advanced countries had taken unorthodox and innovative measures to cushion its citizens and was time for the country’s policymakers to be equally proactive.
“The United States has passed the Inflation Reduction Act, where the new UK Prime Minister has imposed caps on energy prices for two years, also France has capped fuel prices and limited electricity tariff increases to 4 per cent” IEA said.
Adding that, while the focus may now be on the immediate crisis, it would take far-reaching, comprehensive measures to address the underlying vulnerabilities and policy lapses in order to achieve durable price stability in the country.
The Director of Research at the Institute of Economic Affairs, Dr. John Kwakye is warning of further hikes in inflation if the Bank of Ghanaphases out the 1 and 2 notes as planned.
In a tweet, he said the planned move will not only put pressure on the 5 note but will also trigger higher inflation.
“Phasing out 1 and 2 cedi notes from the economy as planned by BoG will not only put pressure on the 5 cedi notes, but will also further fuel inflation”
Dr. Kwakye who is an immediate past member of the Monetary Policy Committee of the Bank of Ghana explained further that the country may undertake a redenomination of the local currency again in the future if it does not address the rapid depreciation of the cedi and inflation.
“If we don’t rein in inflation and cedi depBoGreciation, it won’t be long before we undertake another redenomination.”
The country’s inflation is one of the highest on the continent so far this year.
It hit 33.9% in August 2022, the highest in 21 years, data from the Ghana Statistical Service (GSS) revealed.
This is expected to increase the cost of borrowing by raising interest rates further, and consequently trigger increase cost of living and doing business.
The Institute stated that specific inflation-causing variables should be targeted in a statement on September 19, 2022.
“The cost and supply issues, especially those relating to food, fuel, transportation, and the exchange rate, are a major contributor to the current inflation.
Breaking down the 33.9% headline inflation for August into its component parts shows the effects of these factors: “Diesel inflation was 116.9%; petrol inflation, 80.5%; transport inflation, which includes fuel costs, was 45.7%; imported inflation, which reflects the effect of the exchange rate, was 35.2%; and food inflation, 34.4%.
The IEA stated that among measures that can be adopted to reduce inflation, these four should be looked at by the government.
1. Regarding food, we call for reinforcement of measures to ensure that food stocks are easily transported from farm gates to markets. We call for subsidies on basic staples like maize, rice, cooking oil, and bread.
2. With regard to fuel, we advocate for the elimination of some fuel taxes and levies as well as the use of a portion of the government’s windfall profits from rising oil prices to reduce the cost of gasoline at the pump.
3. In terms of transportation, we demand the development of public transportation and the subsidization of fare prices to assist the general population.
4. With regard to the exchange rate, we urge the Bank of Ghana to implement foreign exchange legislation, such as those that deal with traveler carry-on baggage restrictions, forex trading, the pricing of products and services in forex, and bank-to-bank currency transfers.
In order to lessen pressure on the currency rate, we also urge the Bank to work with overseas businesses to stagger the repatriation of their earnings and profits.
Director of Research at the Institute of Economic Affairs (IEA) has urged the central bank, to be reactive in its development finance function geared towards a post coronavirus pandemic recovery.
According to Dr John Kwakye, the BoG as a matter of priority must create a department within the bank or a separate development finance institution outside the bank to go beyond its narrow price stability mandate to support the economy.
Speaking at a press briefing in Accra on Tuesday, July 28, 2020, Dr Kwakye said; “One key area that the BoG can offer direct support to the economy is the food buffer stock system, given the high incidence of post-harvest losses in the countryâ€.
Though Dr Kwakye commends the BoG for being somewhat involved in such a scheme recently, he is urging it to further develop in that role in order to scale it up to advance the economy.
Data released by the Ghana Statistical Service (GSS) revealed that for the first quarter of 2020, the agriculture sector expanded by 2.8 percent and the industry sector by 1.5 percent.
Some economists, civil society and advocacy groups have all urged government to set up an Agriculture Sector Investment Fund to help address the resource constraints for achieving food security for a post-harvest recovery as a result of the coronavirus pandemic.
More on reports that the global demand for energy is set to plummet by a record amount this year, according to a forecast from the International Energy Agency (IEA).
The group has warned that storage space for excess crude oil is likely to run out in the coming weeks.
“We may well see around mid-June the global storage capacity [will] be full,†executive director Fatih Birol told Reuters news agency. He said the problem was worst in North America.
Oil firms have resorted to renting tankers to store the surplus supply and that forced the price of US oil into negative territory for the first time in history earlier this month.
The International Energy Agency (IEA) on Wednesday forecast a 29 million barrel per day (bpd) dive in April oil demand to levels not seen in 25 years and warned no output cut by producers could fully offset the near-term falls facing the market.