Vice President Dr Mahamudu Bawumia introduced the Gold for Oil (G4O) policy in 2022 to address Ghana's declining foreign currency reserves and the increasing demand for dollars by oil importers.

These challenges were contributing to the depreciation of the Cedi and a subsequent rise in living costs.

The G4O programme aimed to stabilize the Cedi by leveraging Ghana's gold reserves to secure competitively priced oil.

Two years later, the 2023 Auditor-General's report has revealed significant issues with the implementation of the Gold for Oil programme.

Read also: Gold for oil: BoG spends GH¢2.43bn on petroleum import finance

The report highlighted the absence of a formal agreement between the Bank of Ghana (BoG) and the Precious Mineral Marketing Company (PMMC), which was responsible for purchasing the gold.

Without a formal agreement, the A-G stated that key terms of engagement, such as fees or commissions paid to PMMC, were not confirmed.

The Auditor-General stressed that transactions of this nature must be formalized to ensure clarity and mutual understanding between the involved parties.

“Without a formal agreement, both parties might lack the certainty of common understanding as to the terms which govern the business relationship.”

The BoG in its response explained that forex reserves came under pressure in 2022 due to a challenging macroeconomic environment caused by the COVID-19 pandemic, the Russia-Ukraine war, and pre-existing vulnerabilities.

"Fiscal and debt sustainability concerns, coupled with a sovereign downgrade, hindered the ability to secure external financing from international capital markets," BoG added.

In response to the depreciating Cedi and rising inflation, the BoG noted that it implemented innovative strategies, including the G4O policy, adding that it obtained approval to purchase gold from eligible small-scale miners through PMMC for onward sale overseas to acquire forex and facilitate domestic gold purchase agreements.

Although a Memorandum of Understanding (MoU) was signed between the BoG and PMMC to establish operating procedures, a formal agreement had yet to be finalized.

The Auditor-General urged the BoG management to ensure a formal agreement is conducted for gold purchase and sale transactions with PMMC.