Figure 1: Current Account Balance in Ghana (2016-2024)
Sources: IMF 2019, Ghana 2019 Article IV Consultation; IMF 2017, Ghana 2017 Article IV Consultation. Notes: (*) Figures from 2019 onwards are projections.
Total merchandise imports to Ghana decreased to USD 11.9 billion in 2018, from an annual average of USD 13.0 billion for 2015 to 2017[1]. Exports increased to USD 14.6 billion in 2018, from an annual average of USSD 11.6 billion for 2015 to 2017[2]. The faster growth in exports has improve Ghana’s current account balance, which narrowed from a deficit averaging -USD 2.3 billion (approx. -4.4% of GDP) for 2016 to 2018, to a deficit of -USD 2.1 billion (approx. -3.1% of GDP) in 2019[3]. The faster growth in export earnings has not been sufficient to improve Ghana’s balance of payments but gross official reserves have increased.
Figure 2: Capital and Financial Account Balance in Ghana (2016-2024)
Sources: IMF 2019, Ghana 2019 Article IV Consultation; IMF 2017, Ghana 2017 Article IV Consultation. Notes: (*) Figures from 2019 onwards are projections.
Ghana’s capital and financial account balance deteriorated from a surplus (net inflows) averaging USD 2.5 billion (approx. 4.8% of GDP) for 2016 to 2018, to a surplus of USD 2.1 billion (approx. 3.1% of GDP) in 2019[4]. Ghana’s balance of payments deteriorated from an average of USD 180.7 million (approx. 0.4% of GDP) for 2016 to 2018, to a surplus of USD 6.0 million (approx. 0.01% of GDP) in 2019[5]. Gross official reserves increased from USD 4.8 billion in 2016 to USD 5.3 billion in 2018, before decreasing to USD 5.1 billion in 2019[6]. During this period, Ghana experienced volatile inward FDI and outward FDI flows.
Figure 3: Gross Official Reserves and Balance of Payment in Ghana (2016-2024)
Sources: IMF 2019, Ghana 2019 Article IV Consultation; IMF 2017, Ghana 2017 Article IV Consultation. Notes: (*) Figures from 2019 onwards are projections.
Inward FDI inflows increased from USD 3.2 billion in 2015 to USD 3.3 billion in 2017, before deteriorating to USD 3.0 billion in 2018[7]. As a result, Ghana’s inward FDI stock increased from an average of USD 29.8 billion for 2015 to 2017, to USD 36.1 billion in 2018[8]. Ghanaian citizens also decreased their investments abroad as inward FDI to the country moderated.
Figure 4: Inward Foreign Direct Investment in Ghana (2015-2018)
Sources: UNCTAD 2019, UNCTADStat Database.
Outward FDI outflows decreased from USD 221.4 million in 2015 to USD 15.9 million in 2017, before increasing to USD 81.0 million in 2018[9]. As a result, Ghana’s outward FDI stock increased from an average of USD 366.2 million for 2015 to 2017, to USD 463.0 million in 2018[10]. These capital flows have improved Ghana’s balance of payment and the country’s net international FDI position.
Figure 5: Outward Foreign Direct Investment from Ghana (2015-2018)
Sources: UNCTAD 2019, UNCTADStat Database.
Ghana’s balance of payment has been supported by the improved current account balance despite the fluctuations in the capital and financial account surplus in the period from 2015 to 2018. Outward FDI flows have been decreasing as inward FDI inflows moderated which has also supported the balance of payments and improved Ghana’s net international FDI position. However, Ghana’s net international FDI position deteriorated from net liabilities amounting to an average of -USD 32.7 billion (approx. -72.3% of GDP) for 2015 to 2017, to net liabilities amounting -USD 38.9 billion (approx. -58.9% of GDP) in 2018[11].
Figure 6: International Foreign Direct Investment Position in Ghana (2015-2018)
Sources: UNCTAD 2019, UNCTADStat Database.
At these levels Ghana’s foreign liabilities are significant as a proportion of GDP. Given the relatively narrow domestic capital markets, Ghana should focus on attracting inward FDI in sectors that will expand its productive capacity and diversify its exports because the country is still heavily dependent on commodity exports. Nevertheless, Ghana’s balance of payments surplus is projected to deteriorate to a deficit in 2020 before recovering to a surplus in the medium-term, which is projected to increase gross official reserves.
Improvements in inward FDI inflows should improve Ghana’s balance of payments despite the widening current account deficit in the forward-looking medium-term. The current account deficit is projected to widen from a deficit of -USD 2.1 billion (approx. -3.1% of GDP) in 2019 to an average of -USD 2.5 billion (approx. -3.1% of GDP) from 2020 to 2024[12]. Ghana’s capital and financial account balance is projected to improve to a surplus (net inflows) averaging USD 3.0 billion (approx. 3.7% of GDP) from 2020 to 2024[13]. Therefore, the balance of payment is projected to improve from a deficit of -USD 11.0 million in 2020 to a surplus of USD 885.0 million in 2024, which is equivalent to an average deficit of USD 482.0 million (approx. 0.5% of GDP)[14]. Thus, Ghana’s gross official reserves are projected to increase from USD 5.0 billion in 2020, to USD 6.9 billion in 2024[15].
[1] UNCTAD 2019. UNCTADStat Database, United Nations Conference on Trade and Development: Geneva. Available At: https://unctadstat.unctad.org/ [Last Accessed: 8 March 2020].
[2] UNCTAD 2019. UNCTADStat Database, ibid.
[3] IMF 2019. Ghana 2019 Article IV Consultation, International Monetary Fund: Washington, D. C. Available At: https://www.imf.org/ [Last Accessed: 8 March 2020]; IMF 2017. Ghana 2017 Article IV Consultation, International Monetary Fund: Washington, D. C. Available At: https://www.imf.org/ [Last Accessed: 8 March 2020].
[4] IMF 2019. Ghana 2019 Article IV Consultation, ibid.; IMF 2017. Ghana 2017 Article IV Consultation, ibid.
[5] IMF 2019. Ghana 2019 Article IV Consultation, ibid.; IMF 2017. Ghana 2017 Article IV Consultation, ibid. There are relatively significant errors and omissions in Ghana’s balance of payments data equivalent to -USD 66.0 million in 2016, USD 141.0 million in 2017 and -USD 128.0 million in 2018.
[6] IMF 2019. Ghana 2019 Article IV Consultation, ibid.; IMF 2017. Ghana 2017 Article IV Consultation, ibid.
[7] UNCTAD 2019. UNCTADStat Database, ibid.
[8] UNCTAD 2019. UNCTADStat Database, ibid.
[9] UNCTAD 2019. UNCTADStat Database, ibid.
[10] UNCTAD 2019. UNCTADStat Database, ibid.
[11] UNCTAD 2019. UNCTADStat Database, ibid.
[12] IMF 2019. Ghana 2019 Article IV Consultation, ibid.
[13] IMF 2019. Ghana 2019 Article IV Consultation, ibid.
[14] IMF 2019. Ghana 2019 Article IV Consultation, ibid.
[15] IMF 2019. Ghana 2019 Article IV Consultation, ibid.
