Ghana: Trade surplus narrows further

…external financial position made tenable by recent Eurobond issuance

Ghana’s merchandise trade balance, which it has maintained over every successive quarter since the last quarter of 2016, has however continued to narrow according to data from the Bank Of Ghana and the latest statistics confirm that this trend has continued into the latest reporting period.

For the first four months of this year, total exports declined marginally by 0.2 percent year-on-year to US$5,131 million, driven mainly by a 21 percent decline in volume of gold exported attributed to instability in the sector. Total imports, on the other hand, rose by US$239.3 million to US$4,372 million, supported by increased non-oil imports. As a result, the trade balance recorded a surplus of US$759.1 million (1.1 percent of GDP) compared with a surplus of US$1,006.3 million (1.4 percent of GDP) in the same period of 2020.

The average prices of cocoa, gold and crude oil traded mixed in the year to April 2021.Crude oil prices rebounded strongly and increased by 30.0 percent to settle at an average price of US$65.3 per barrel compared to US$55.3 per barrel in January, supported by production restraints from OPEC+ and re-opened economies as vaccinations expanded across most advanced countries. In contrast, gold prices declined by 5.3 percent to US$1,760.7per fine ounce on account of stronger US dollar and rising US Treasury yields. Similarly, cocoa prices eased to US$2,419.5 per tonne in April 2021 compared to the US$2,523.9 per tonne in January. The decline in cocoa prices was attributed to increased supply in Ivory Coast.

The BoG’S data is inadvertently alarmist in that its overall balance of payments figures are up to March and thus do not incorporate the effects of the latest US$3 billion Eurobond issuance. Thus the data suggests that the overall balance of payments position deteriorated from US$1,476.5 million positive balance as at March 2020 to a shortfall of US$429.9 million a year later.

This situation has however been reversed by the latest Eurobond issuance done in late March

Indeed, following the issuance, Gross International Reserves stood at US$10,990.3 million at the end of April 2021, providing cover for 5.1 months of imports of goods and services which is the sturdiest import cover position to date. The reserve level compares with a stock position of US$8,624.4 million, equivalent to 4.1 months of import cover recorded at the end of December 2020.

However the data exposes the worrying fact that Ghana’s external financial position is totally reliant on the latest of its annual external borrowings without which it would be untenable.

Instructively Ghana’s total public debt, expressed in US dollar terms rose from US$43.1 billion as at March 2020 to US$53.1 billion by March 2021. However, the stated public debt to Gross Domestic Product ratio has declined from 76.1 percent as at the end of 2020 to 70.2 percent three months later, but only because government uses its projected end of year GDP as the denominator for its computations rather than the actual GDP; which means it is currently using a GDP computed to include the targeted 5.0 percent growth for 2021 – even though there is no guarantee it will be achieved

Cumulatively, the Ghana Cedi appreciated by 0.5percent against the US dollar in the year to April 2021, compared with a depreciation of 1.2percent in the same period of 2020. The Ghana cedi also appreciated by 2.4percent against the Euro and depreciated by 0.6 percent against the Pound Sterling, compared with corresponding 1.4percent and 3.7percent appreciation over the same period in 2020.

By Toma Imirhe