The latest data from the Bank of Ghana showed that gross reserves edged higher in April, coming in at US$5.2 billion from US$5.1 billion in March.
In the MPC statement where the authorities opted to keep interest rates flat, the MPC noted that reserve have increased to US$5.7bn as at 19 May, which equates to 2.6 months of import cover. But this amount is still below the IMF’s adequacy threshold of three months. Ghana’s reserves have fallen by almost 17 percent this year mainly due to continued central bank intervention in the FX market to slow the rate of depreciation of the cedi amid a deteriorating fiscal and macroeconomic backdrop and worsening dollar scarcity.
Looking ahead, risks to Ghana’s gross reserves are titled to the upside as the IMF approval and funding could open the door to other multilateral funding should they continue to adhere to strict fiscal prudence. Latest trade balance data further shows that the trade balance remains positive and improved to 2.2 percent of GDP from 1.6 percent of GDP over the same time last year. This is supported by lower imports (down 14.0 percent year-to-date) relative to the same period last year. If the trade surplus continues to grow, boosting the current account, and if the capital and financial account outflows taper this year, we can expect meaningful improvement in reserves.