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Ghana’s reserves fall to US$11.07bn as Bank of Ghana prioritises rebuilding

The Crystal Clear LENS 3 days ago 2 min read

The Bank of Ghana is prioritising the rebuilding of international reserves after Ghana’s gross reserves fell to US$11.07 billion, equivalent to 4.2 months of import cover.

Governor Dr. Johnson Pandit Asiama identified the country’s external position as one of three key issues facing the Monetary Policy Committee (MPC) at its 132nd meeting.

“The second is the external position. The weaker current account, the decline in reserves and the pause in gold exports by GoldBod since mid-August call for a careful look at our buffers ahead of the usual rise in foreign exchange demand in the fourth quarter,” he said.

Dr. Asiama said rebuilding reserves would remain a major priority for the Bank in the coming months.

“Rebuilding reserves will be a key priority for the Bank in the coming months.”

The focus on reserves comes despite improving domestic economic conditions.

According to the Governor, Ghana’s fiscal position is stronger than programmed, with the country recording a primary surplus above target.

Public debt has also fallen to 45 per cent of Gross Domestic Product (GDP), while all three major credit rating agencies have upgraded Ghana.

Dr. Asiama added that Ghana’s debt distress risk had been reassessed from high to moderate. He also described the banking sector as sound, liquid and profitable.

However, pressures on the external accounts could limit the room available to policymakers.

The current account is projected to record a deficit in the third quarter. This is partly due to slower gold shipments and higher service payments.

Dr. Asiama also highlighted the pause in gold exports by the Ghana Gold Board (GoldBod) since mid-August.

He said the development required close attention ahead of the expected increase in foreign exchange demand during the final quarter of the year.

“The domestic position affords policy space; the external position determines how much of it can safely be used. Rebuilding net foreign assets must therefore remain the priority heading into the fourth quarter,” he said.

Ghana’s external position is also being assessed against a more difficult global economic environment.

Dr. Asiama said the Middle East conflict had contributed to higher energy prices and tighter global financial conditions. A stronger US dollar has also put pressure on emerging market currencies, including the cedi.

Higher gold prices could support Ghana through increased export earnings, reserve accumulation and government revenue.

However, higher energy and fertiliser import costs could raise transportation, production and consumer prices.

These competing pressures will form part of the Monetary Policy Committee’s assessment as it considers the appropriate monetary policy stance.

At its July meeting, the Committee unanimously maintained the Monetary Policy Rate at 14.0 per cent.

The 132nd meeting will determine whether the balance of domestic and external risks warrants a change in the current policy position.