Net reserves revised upwards to 1.4 months import cover; to rise further to 2.1 months in 2024
The IMF, in its October 2023 Regional Economic Outlook Report for Sub-Saharan Africa, has revised Ghana’s net international reserves for 2023, marking a significant upswing in the nation’s financial standing.
Initially standing at a modest 0.8 months of import cover, Ghana’s net international reserves have been revised upward to an encouraging 1.4 months, signifying a substantial improvement in the country’s financial preparedness.
The IMF’s impact extends beyond 2023, as the institution also revised Ghana’s net reserves for the previous year, 2022. The initial figure of 0.6 months of import cover was adjusted to a more robust 1.2 months, highlighting a positive trajectory in economic stability.
Looking ahead to 2024, the IMF anticipates further growth, with net international reserves projected to reach 2.1 months of import cover. This forecast underscores the ongoing efforts to strengthen Ghana’s financial foundations.
The heart of this transformation lies in the IMF Program initiated in June 2023, a strategic maneuver that has reaped tangible rewards. Ghana has received a significant $600 million injection from the IMF to fortify its balance of payments. The infusion has, in turn, led to a stabilization of economic fundamentals, most notably, a resilient exchange rate.
Notably, Ghana is set to receive an additional $600 million in November 2023, pending a review by the IMF Board. The Economic Credit Facility (ECF) program envisions a substantial financial boost for Ghana, with a total of $3 billion earmarked over the next three years.
The positive ripple effect of these financial interventions is evident. The suspension of external debt repayment, in tandem with the IMF Program, has bolstered investor confidence. The Ghanaian cedi has displayed commendable stability since the first quarter of 2023, while inflation has seen a notable slowdown.
In a regional context, Ghana’s prospects are on an upward trajectory. When compared to other Sub-Saharan African nations, such as South Sudan, Ethiopia, and Zimbabwe, Ghana’s import cover stands considerably stronger, marking it as a standout performer.
With a gross reserves position of 1.0 month of import cover as of August 2023, Ghana’s financial resilience is evident. The Gross International Reserves (GIR), excluding Encumbered Assets and Petroleum Fund, stood at a robust $2.08 billion, equivalent to 1.0 month of import cover.
The Bank of Ghana’s data in their September 2023 Summary of Economic and Financial Data underscores this promising trend. Reserves showed an impressive growth trajectory, surging from $1.406 billion (0.7 months of import cover) in April 2023 to $2.162 billion (1.0 month of import cover) in May 2023, with subsequent stability at the 1.0 month of import cover level in June, July, and August 2023.
Ghana’s commitment to financial stability, in conjunction with the strategic support from the IMF, is evidently reaping rewards. The nation is carving a path towards economic resilience, bolstering its financial standing, and gaining the trust of investors on the international stage.
