3.7 months import cover not really a problem, says BoG Director of Research
Director of Research at the Bank of Ghana (BoG), Dr Philip Abredu-Otoo, has opined that the country’s current import cover of 3.7 months is not really a problem given that the conventionally required minimum import cover for countries is 3 months.
According to him, Ghana having met the required 3 months minimum import cover, also has a buffer of almost one month of import cover.
The Bank of Ghana at the 106th Monetary Policy Committee press briefing in May 2022, noted the nation’s international reserves had dropped to $8.34bn as at end-April 2022.
The decline represents some $1.42bn reduction in the country’s foreign reserves from the $9.76bn reserves accumulated at the end of January 2022.
With total reserves pegged at $8.34bn, the country’s import cover currently stands at 3.7 months (from the previous 4.4 months).
Speaking at the Bank’s Financial Literacy Training Workshop for Journalists in the Southern Zone, Dr Abredu-Otoo attributed the decline in international reserves to the country’s unsustainable debt stock, large imports and investor confidence in the economy.
According to him, these are the three main factors accounting for the decline in the country’s international reserves.
“The country’s mounting and unsustainable debt stock is consuming part of the nation’s reserves, because we rely on the reserves to service our debts. So the more our debts grow the more reserves we need to service it and that adds to the depletion of the reserves (sic).
“Then there is significant imports which results in high demand for the dollar to support imports and this also adds to the decline in reserves.”
“Then lastly is investor confidence in the economy, when investors unexpectedly exit the economy because they begin to lose confidence in the economy, it puts pressure on country’s reserves and causes a decline (sic),” he noted.
In January 2022, the country’s Gross International Reserves stood at $9.76 billion, about 4.4 months of import cover.
It further dropped to $9.54 billion (4.2 months of import cover) in February 2022 and $8.81 billion (3.9 months of import cover) in March 2022.
According to the figures on External Sector Developments, the Heritage and Stabilisation Funds in April 2022 stood at $939 million. This is compared with $971.4 million in December 2021.
Ghana records $1.33bn trade surplus in April 2022
Ghana recorded a trade surplus of $1.33 billion in the first four months of 2022, higher than the $1.107 billion recorded in the entire 2021.
This is approximately 1.9% of Gross Domestic Product (GDP).
According to the Bank of Ghana Summary of Economic and Financial Data, total exports in the 4-months of 2021 was $6.10 billion. This is against total imports of $4.77 billion.
The increase in the trade balance is due to the increase in the price of crude oil on the world market and improve gold production in the country.
The data further revealed that gold dominated the total value of exports, recording $1.87 billion in April 2022, followed by oil which registered $1.85 billion in April 2022.
