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Ghana’s balance of payment deficit widens

By Elorm Desewu

Ghana’s balance of payment deficit has more than doubled for the first quarter of 2022, according to the Bank of Ghana, (BoG).

This was due to the capital and financial account recording some significant outflows from net portfolio reversals and net private capital outflows, which resulted in an overall balance of payments deficit of US$934.46 million for the first quarter of 2022, compared with a deficit of US$429.93 million, same time last year.

However, the trade surplus improved significantly recording US$1.3 billion in the first four months of the year, compared with a trade surplus of US$778.00 million in the same period of last year.

The trade surplus was offset by investment income outflows and net services payments, resulting in a current account deficit of US$128.15 million (0.2 percent of GDP) for the first quarter of the year, representing a marginal improvement from the current account deficit of US$197.0 million (0.2 percent of GDP) recorded in the first quarter of 2021.

Commodity prices have remained volatile due to the on-going geopolitical tensions. Average crude oil prices gained 42.0 percent on a year-to-date basis to settle at US$106.2 per barrel in April 2022, supported by supply constraints arising from the geopolitical tensions between Russia and Ukraine.

Gold prices also gained 8.1 percent to settle at US$1,935.89 per fine ounce, on the back of increased safe-haven demand amid global inflation concerns. Similarly, cocoa prices went up by 4.4 percent to settle at US$2,591.06 per tonne in April 2022, compared to the US$2,481.95 per tonne in December 2021, due to unfavourable weather conditions across West Africa.

The improvement in export earnings was attributed to crude oil and non-traditional exports. Crude oil export receipts recorded significant growth of 61.0 percent to US$1.9 billion, due to price effects, while gold exports improved by 3.6 percent, also supported by price effects.

Non-traditional export receipts crossed the US$1.0 billion mark in the review period and contributed significantly to the trade surplus. These developments far outweighed the 7.7 percent growth in total oil imports in the review period, on the back of compressed non-oil imports.

Gross International Reserves (GIR), at the end of April 2022, stood at US$8.34 billion, equivalent to 3.7 months of import cover.

This compares with US$9.70 billion, equivalent to 4.3 months of import cover at end-December 2021. 21. In the foreign exchange market, the Ghana Cedi depreciated by 15.6 percent against the US dollar, 13.1 percent against the Pound Sterling, and 13.6 percent against the Euro, during the first quarter of 2022.

From the beginning of April through 18th May 2022, there has been some moderation in the rate of depreciation. The Ghana Cedi depreciated by 0.2 percent against the US dollar, but appreciated by 5.7 percent against the Pound Sterling and 5.4 percent against the Euro, bringing the year-to-date depreciation against these currencies to 15.8 percent against the US dollar, 8.2 percent against the Pound Sterling, and 8.9 percent against the Euro.

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