Ghana has witnessed a dramatic decline in its Gross International Reserves (GIR), losing a staggering $6.3 billion in just two years, according to the Bank of Ghana’s Summary of Economic and Financial Data report.
The GIR serves as a crucial safety net for countries to navigate unforeseen international payment difficulties.
As of August 2021, Ghana boasted an all-time high GIR of approximately $11.4 billion. However, this reserve has dwindled drastically, standing at a mere $5.09 billion as of August 2023. This alarming depletion rate of 55.4% in just 24 months raises concerns about the country’s economic stability.
One key indicator of this decline is the import cover, which measures the ability to finance imports using reserves. In August 2021, Ghana had enough reserves to cover 5.2 months (22 weeks) of imports. As of August 2023, the remaining GIR can only sustain 2.4 months (12 weeks) of import cover, underscoring the urgency of the situation.
Governor of the Bank of Ghana, Ernest Addison, recently emphasized that the government’s decision to suspend interest payments on external debt has saved the country $2 billion in reserves. This move prevented an even more dire situation for Ghana’s reserve levels.
In a significant development, the International Monetary Fund (IMF) Executive Board, on May 17th, approved an Extended Credit Facility (ECF) arrangement of SDR 2.242 billion (approximately US$3 billion) for Ghana. This decision facilitated an immediate disbursement of SDR 451.4 million (about US$600 million), with further tranches expected to follow every six months, subject to program reviews approved by the IMF Executive Board.
Before the IMF’s approval, Ghana was mandated to implement both domestic and external debt restructuring programs to alleviate the mounting debt service burden on its economy. The nation’s domestic debt restructuring program achieved an impressive 85% participation rate, resulting in debt service savings totaling GHS 34 billion.
Ghana is actively engaged in negotiations with external creditors to restructure approximately $20 billion of its debt, to achieve an external debt service savings target of about $10.5 billion.
