Ghana recorded a Balance of Payments deficit for the full year, 2018 in a reversal of the surplus achieved in 2017, data released by the Bank of Ghana at the weekend has revealed.
This largely accounts for the cedi’s fragility during the last three quarters of the year. The BoP deficit, of US$1,280.0 million – in complete reversal of the US$1,091.4 million surplus achieved in 2017 – was incurred despite an expansion of the merchandise trade deficit to US$1,778.8 million last year, up significantly from the trade surplus of US$1,187.7 million generated in the previous year.
However, while the current account deficit was more or less stable at US$2,072.0 million in 2018 (2017: US$2,003.0 million) it was still large enough to wipe away the trade surplus. But the ultimate shortcoming in Ghana’s external sector performance last year was the near halving of the capital and financial account balance to US$1,560.0 million, down from US$3,015.7 million in 2017. The sharp decline in the capital account balance occurred despite the record US$2.5 billion Eurobonds proceeds taken by government last year and another US$1.3 billion in proceeds from the year’s edition of the annual syndicated loan for local cocoa purchases, as private portfolio investment outflows in reaction to higher offered yields on dollar denominated assets took a harsh toll.
The result of all this was a decline in gross international reserves to US$7,024.8 million by the end of 2018, – enough to cover 3.62 months of imports – down from US$7,554.8 million, or 4.24 months of import cover a year earlier. Similarly, Ghana’s net international reserves fell to US$3,851.0 million down from US$4,522.5 million a year earlier.
Ghana’s deteriorated external position is responsible for the pressure under which the cedi came for the last eight months of the year in particular. The poor performance of private portfolio flows last year supports the Bank of Ghana’s decision to suspend its monetary easing with a view to strengthening the competitiveness of cedi denominated investment assets and thus stemming the net outflows.
Another source of worry is Ghana’s increasing reliance on oil exports to maintain the trade surplus which has been consistently recorded since the last quarter of 2016. Although gold still led as the biggest export earner in 2018, generating US$5,461.4 million, this was lower than the US$5,786.2 million it generated in 2017. Similarly export earnings from cocoa declined to US$2,091.6 million last year, down from US$2,661.4 million in 2017. However, oil export earnings, riding on the back of both rising global market prices and increased production, rose to US$4,573.4 million, up significantly from the US$3,115.1 million it generated in 2017.
Total exports amounted to US$14,868.1 million, up from US$13,835.0 million in the previous year. But total imports rose too, from US$12,647.4 million in 2017 to US$13,089.3 million last year.
Encouragingly though, non-oil imports experienced a rare decline albeit a marginal one, from US$12,655.2 million to US$13,089.3 million. Curiously though, oil imports increased to US$2,537.7 million in 2018, up from US$1,992.2 million in 2017, and despite concerted efforts to replace imported light crude oil for electricity generation with locally produced gas.
By Toma Imirhe