The Bank of Ghana (BoG) is confident in its ability to protect the economy from external shocks due to a significant increase in reserves during the first half of the year.
This advancement also enhances the bank’s capacity to stabilize the foreign exchange market.
Governor Dr. Ernest Addison highlighted that the bank’s reserve levels have greatly improved, thanks to a favorable external payments balance and a surplus in the current account.
As of June 2024, the bank’s gross international reserves rose by $947 million to reach $6.87 billion, covering 3.1 months of imports. Meanwhile, net international reserves increased by $1.31 billion to $4.50 billion.
Dr. Addison attributed this strong reserve growth to the Domestic Gold Purchase Programme, which has accelerated the accumulation of reserves beyond what was projected under the IMF-supported initiative.
Economic outlook
The bank observed that global economic activity exceeded expectations in the first quarter of 2024, with the IMF’s growth projections for advanced economies indicating steady performance.
Nonetheless, ongoing inflation in the services sector, driven by rising wages, may prompt central banks to maintain elevated interest rates for an extended period, potentially impacting growth outlooks.
Domestic economy
Ghana’s GDP growth for the first quarter of 2024 exceeded expectations, with economic activity proving resilient despite a restrictive policy approach.
Job Openings
High-frequency indicators point to stronger growth prospects, although consumer and business confidence has weakened due to exchange rate depreciation and elevated food prices.
The bank anticipates a shift in these sentiments as the exchange rate stabilizes and macroeconomic stability improves, which should bolster economic activity.
Fiscal front
On the fiscal front, the bank said fiscal policy implementation so far has been on track and aligned with the IMF programme.
However, it said staying on the course of the fiscal consolidation path for the rest of the year should lock in stability in the overall macroeconomic conditions.
Banking sector performance
Concerning the banking sector’s performance, the bank noted that in the first half of the year, the sector showed signs of continued recovery from the effects of the Domestic Debt Exchange Programme.
Total assets in the banking sector increased by 33.3% to GH¢323.1 billion by the end of June 2024, compared to a 21.2% growth rate at the end of June 2023. Indicators of profitability, liquidity, and efficiency also saw improvements during this period.
The Capital Adequacy Ratio (CAR), after accounting for reliefs, remained steady at 14.3% from June 2023 to June 2024. Without reliefs, the CAR was 10.6% in June 2024, up from 7.4% in June 2023.
Despite these positive developments, the central bank highlighted that high credit risk continues to pose a challenge to the sector’s recovery.
The industry’s Non-Performing Loans (NPL) ratio stood at 24.1% in June 2024, an increase from 18.7% in June 2023.
Nevertheless, the bank expressed optimism that steady profit growth, adherence to recapitalization plans, and stringent credit underwriting standards would support the sector’s full recovery and resilience.
Regarding domestic price trends, the bank noted some uncertainty about the inflation trajectory for the year due to recent exchange rate pressures, increases in utility tariffs, and rising ex-pump fuel prices.
These factors have led to a slightly higher inflation outlook for the year. While inflation is expected to stay within the target range, there is a slight risk of it rising above the target.
To address this, the bank emphasized the need for maintaining a strong monetary policy stance coupled with robust fiscal consolidation efforts to achieve the year-end inflation goals.
Key statistics
Gross International Reserves: US$6.87 billion (end-June 2024)- Net International Reserves: US$4.50 billion (end-June 2024)-
Current Account Surplus: Significantly improved, aided by strong gold exports, robust remittances, and debt suspension.