Ghana’s Reserves Hit US$6.59 Billion, Boosting Economic Outlook

Dr. Ernest Kwamina Addison, Governor of the Bank of Ghana (BoG), announced that Ghana’s gross international reserves have reached US$6.59 billion as of April 2024, providing significant financial coverage for three months of imports. This figure shows a notable increase from US$5.91 billion at the end of December 2023.

During a media briefing following the 118th Monetary Policy Committee (MPC) meeting, Dr. Addison detailed the current state of the country’s economy and its financial strategies amidst fluctuating global conditions.

The global economy has shown resilience despite ongoing monetary policy tightening in developed and emerging markets. The International Monetary Fund (IMF) forecasts steady global growth at 3.2% for 2024 and 2025, driven primarily by robust consumer spending and policy support in major economies like China and the U.S. However, challenges such as the slow disinflation process, geopolitical tensions, and high debt levels pose significant risks to the global economic outlook.

Inflation remains above target globally, exacerbated by rising crude oil prices and higher service sector costs. These challenges have prompted central banks worldwide to maintain higher policy rates to anchor inflation expectations and manage long-term rates, resulting in restrictive global financial conditions.

Ghana has seen a recovery in economic activities, evidenced by a 2.1% growth in the real Composite Index of Economic Activity in March 2024, a significant improvement from a contraction of 6.4% in the previous year. This growth has been supported by increased imports, contributions to the Social Security and National Insurance Trust (SSNIT), and a rise in tourist arrivals.

Despite these positive indicators, the disinflation process remains sluggish, with inflation rates rising from 23.1% in December 2023 to 25.8% at the end of the first quarter of 2024. This increase is primarily due to high food prices, although there was a slight easing in April due to improved food supply, offset by rising non-food inflation caused by exchange rate fluctuations.

The Bank of Ghana’s fiscal performance aligns with the targets set under the IMF-supported program, though the budget execution shows a primary balance deficit slightly wider than projected. To manage liquidity effectively, the bank has implemented stringent measures that have significantly slowed the growth of monetary aggregates.

In the private sector, credit growth remains subdued, indicating ongoing economic challenges. The banking sector, however, shows signs of recovery from the impacts of domestic debt restructuring, with total assets and profitability on the rise.

Dr. Addison emphasized the need for robust fiscal discipline and continued adherence to structural reforms to bolster economic confidence and stability. He also highlighted the importance of maintaining a strong reserve position to support the currency and manage external shocks.

The Bank of Ghana remains committed to stabilizing the exchange rate and ensuring fiscal stability. Dr. Addison called for continued vigilance in monitoring foreign exchange markets and emphasized the need for all stakeholders to refrain from speculative behaviors that could undermine the local currency.

The bank anticipates that inflation will stay within the targeted range of 13-17% by the end of the year, contingent on maintaining a tight monetary stance and effective liquidity management.

While Ghana faces external and internal economic pressures, the Bank of Ghana’s proactive measures and substantial international reserves position the country to manage these challenges effectively. The MPC has decided to maintain the Monetary Policy Rate at 29.0 percent, reflecting a balanced approach to fostering economic growth while containing inflationary pressures.

Source: Ghana Web