Ghana will post its first positive current account balances in 20 years this year after experiencing a deficit of 2.1% of GDP in 2022, ratings agency, Fitch Solutions, has stated.
The UK-based company said the country’s Balance of Payments will turn positive again in 2023 with a surplus of 1.3% of GDP, explaining that the expected reversal in the capital and finance accounts for the year is driven by IMF disbursements of $600 million each under the Extended Credit Facility.
“The trade surplus will remain large by historical standards in H223, as imports will contract more sharply than exports due to weak domestic demand,” the rating agency indicated.
Fitch Solutions also forecasts an improvement in the total balance of payments in 2024, citing improved investor sentiment as a result of Ghana’s progress in external debt restructuring.
This is expected to boost capital inflows, more than compensating the modest current-account deficit forecast for 2024.
The ratings agency has said the country’s current account balance will slip back into deficit in 2024, to a shortfall of 0.2% of GDP, as imports recover while exports will record sluggish growth due to a projected moderation in global gold and cocoa prices.
According to the July 2023 Bank of Ghana Summary of Economic and Financial Stability Report, the country’s Balance of Payments deficit was $107.8 million, or nearly 0.1% of GDP, at the end of June 2023.
Concurrently, the current account balance for April 2023 stood at $849.2 million, approximately 1.1% of GDP.
Fitch Solutions, however, warned that risks to Ghana’s external situation remain severe, stating that “if negotiations between Ghana and its external creditors stall, investor confidence would weaken, likely triggering another round of capital flight.”
It claimed that this would put more strain on the country’s foreign exchange reserves and the cedi, causing inflation to remain high for longer, and thereby harming economic growth and social stability.
By Ernest Kofi Adu