Ghana’s gross international reserves have reached an all time high following the successful issuance, in mid May 22, 2018 of US$2 billion in Eurobonds, the biggest issuance done by Ghana since it first entered the international capital markets in 2007.
The latest sovereign debt issuance has taken Ghana’s gross foreign reserves to about US$9 billion, enough to cover at least five months of imports.
Although more than half of the new issuance is going into refinancing of existing debt, this does not change the total quantum of foreign exchange at the country’s disposal and thus it adds to the Bank of Ghana’s foreign exchange coffers which form the country’s gross foreign reserves.
The IMF’s Executive Board, in September last year, approved the Government of Ghana’s request that its support be used in part for budgetary support, rather than wholly for balance of payments support. The use of the incoming IMF support to finance the 2018 budget thus closes the external deficit financing gap hitherto outstanding for this financial year.
Importantly, Ghana’s improved balance of payments position and record high gross international reserves, will give both the local and foreign financial and business communities the confidence requisite for forestalling any speculative trading by foreign exchange traders, who in the past have fueled the Cedi’s depreciation by taking currency trading positions against the cedi, for profit.
Meanwhile, the economic fundamentals created by Ghana’s merchandise trade and current account positions are ensuring that non-speculative currency trading favors the Cedi’s stability. Ghana’s rare merchandise trade surplus has continued through the first quarter of 2018, thus bringing its run to six successive quarters. However, the trade surplus for the first four months of this year showed a marginal reduction in size compared with the corresponding period of 2017.
Ghana’s trade surplus for the period covering January to April was US$1,139.1 million, down slightly from the US$1,164.0 million recorded during the first four months of last year. Instructively, the trade surplus was achieved primarily through a near doubling of crude oil export revenues to US$1,465 million.
Ghana’s total import bill rose during the first four months of 2018, from US$3,942.6 million in 2017 to US$4,388.2 million this year. While non-oil imports rose to US$3,508.2 million, up from US$3,182.1 million in the previous year, oil imports only cost US$880 million, up from US$760.5 million during the corresponding first four months of 2017.
The current account surplus for the first quarter of 2018 was US$225 million, or 0.5% of GDP, down from US$328 million for the corresponding period of last year. The capital account deficit for the first quarter of 2018 also narrowed to US$516.0 million [1.0% of GDP] down from US$621.5 million [1.4% of GDP} incurred during the first quarter of 2017.