Energy expert and Managing Director of the Bulk Oil Storage and Transportation Limited (BOST), Edwin Provencal has suggested that a stabilisation of foreign exchange rates in the country could lead to more consistent fuel pricing.

In an interview with Joy News on May 15, 2024, Dr Provencal pointed out that since January 2023, the stabilisation of local fuel prices has been largely due to the forex stability brought about by the Gold for Oil (G4O) programme and other factors.

However, he noted that the Bank of Ghana faces limitations on how much it can intervene in the forex market, as dictated by the International Monetary Fund (IMF).

“Because there are other factors also affecting the price of dollars, there's a ceiling to what the Bank of Ghana, can intervene in the market.

“So, at the top level, the IMF tells the Bank of Ghana to shore up the reserves and at the bottom level, it says there's a ceiling on the amount of intervention you can make in the market when it comes to demand,” he said.

With the first quarter of the year seeing significant dividend declarations and portfolio reversals, the demand for dollars has surged.

Dr Provencal expressed relief that the G4O programme has mitigated what could have been a more severe situation.

He also mentioned ongoing discussions between the cabinet and the Bank of Ghana to potentially release more reserves to counteract the rising dollar trend.

“Had it not been that Gold 4 Oil had held the fort for all this while, I can tell you for a fact that the situation would have been worse. I'm also happy to know that cabinet has spoken to the Bank of Ghana to talk to the IMF to ensure that we can provide because we have quite some reserves so that we can release some reserves onto the market to help alleviate the upward trend of the dollars,” he added.

Acknowledging the multifaceted nature of inflation, Dr Provencal emphasised that both monetary and fiscal pressures influence the dollar's value.

He warned that unresolved negotiations with debtors and market expectations could further impact the dollar's demand and, consequently, fuel prices.

“If we haven't resolved our negotiations with our debtors, they haven't gone on as planned actors in the market will act in a certain way. If the demand for the dollar goes up more than what the Bank of Ghana is putting on the market, it would affect the price of the dollar,” he said.

Despite the G4O programme covering about 40% of the market and importing 1.2 million metric tonnes of oil since last January, Dr Provencal cautioned that other determinants beyond demand and supply could undermine the programme's effectiveness in stabilizing prices.

“If those other variables are not anchored well, it may negate the influence of gold for oil.

“We can all see what's happening to the price of the dollar. The Gold 4 Oil is not the only panacea to the inflation problem. There are other variables as well,” he said.

ID/NOQ

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