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The Governor of the Bank of Ghana, Dr. Ernest Addison, has expressed his confidence in the bank’s ability to improve its capacity to protect the economy from external shocks and maintain stability in the foreign exchange market.
This optimism stems from favorable external conditions and strong reserve accumulation in the first half of 2024.
At a press conference following the recent 119th Monetary Policy Committee (MPC) meeting, where the committee decided to maintain the policy rate at 29 percent for the third consecutive time, Governor Addison stressed that Ghana’s external payments position has improved significantly, attributing it to a number of factors.
“The current account surplus improved significantly, driven by strong gold exports, buoyant remittances and a debt moratorium,” Dr Addison said.
He also noted that the domestic gold purchase program had a positive impact on accelerating reserve accumulation, exceeding initial forecasts of the IMF support program.
Ghana’s trade balance improved significantly in the first half of 2024, with a surplus of $1.81 billion, up from $1.6 billion in the same period of 2023. The improvement was due to a sharp increase in exports, especially in the gold and crude oil sectors. Gold exports surged 46.4% to $5.04 billion, while crude oil exports increased to $2 billion from $1.7 billion the previous year.
However, the cocoa sector experienced a downturn, with exports of cocoa beans and products falling 47.4% to $760 million, compared with $1.45 billion in the first half of 2023. Total imports rose 13.5% to $7.42 billion, driven by both oil and non-oil imports.
The current account balance improved significantly, with a surplus of $1.28 billion in the first half of 2024, up from $863 million in the same period of 2023. This positive trend was supported by an improved trade surplus and higher remittance flows.
Net outflows from the capital and financial accounts fall, from $1.04 billion in 2023 to $367.5 million in 2024. The decline is attributed to higher government loan originations, lower amortization, and a sharp drop in portfolio outflows.
These developments ultimately resulted in an overall balance of payments surplus of $942.3 million in the first half of 2024, in stark contrast to a deficit of $341 million in the same period of 2023.
The Governor also reported a significant increase in international reserves in the first six months of 2024. Gross international reserves increased by $947 million to $6.87 billion, equivalent to 3.1 months of imports. Net international reserves increased significantly by $1.31 billion to $4.5 billion at the end of June 2024.
Despite these positive developments, the Ghana cedi still faced some pressure in the first half of the year – especially in May 2024. However, Dr. Addison noted that the situation has since eased and cited several contributing factors.
“The relative stability in the foreign exchange market over the past few weeks reflects the continued tight monetary policy stance – implementation of a dynamic cash reserve ratio to mop up excess liquidity, revisions to bank import advances rules, positive sentiment from the third tranche of the IMF’s Extended Credit Facility and agreement in principle with external creditors,” he said.
As of July 19, 2024, the Ghanaian Cedi has depreciated 19.6% against the US dollar since the beginning of the year, a slight improvement from the 22.1% depreciation in the same period last year.
With these developments, the Bank of Ghana appears well-positioned to respond to potential external economic challenges and provide a stabilizing influence on the country’s economy and currency.
Source: thebftonline.com
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