Ghana’s activities in the external sector last year resulted in a decline in the country’s trade surplus by US$0.9 billion relative to the surplus recorded in 2020.

Data from the Bank of Ghana (BoG) show that the provisional trade balance for 2021 was a surplus of US$1.1 billion (1.6% of GDP) compared to a surplus of US$2.0 billion (2.8% of GDP) in 2020.

The decline in the trade surplus, according to the BoG, was due mainly to increased imports as the economy rebounded. Total exports in 2021 increased by US$0.2 billion driven by lower gold receipts. Cocoa and crude oil receipts, however, grew by 20.3 percent and 35.6 percent respectively in 2021.

“Total exports were estimated at US$14.7 billion in 2021, compared with US$14.5 billion in 2020. On a year-on-year basis, the lower total export growth of 1.8 percent was driven by a 25.2 percent contraction in gold receipts as production volumes declined by over one (1) million fine ounces during the year”.
Bank of Ghana

Strong growth in imports

Total imports, on the other hand, increased by 9.7 percent year-on-year to US$13.6 billion compared with US$12.4 billion. The BoG explained that the growth in imports was attributed to a 43.8 percent growth in oil and gas imports. Of this, refined petroleum products increased by almost US$1 billion over the year reflecting the rebounding economy from the pandemic restrictions in 2020.

“The lower trade surplus, together with higher investment income outflows stemming from increased interest payments, and higher profits and dividend repatriation, resulted in a current account deficit of US$2.5 billion (3.3 percent of GDP) in 2021, higher than the deficit of US$2.1 billion (3.1 percent of GDP) recorded in 2020”.
Bank of Ghana

The BoG also disclosed that the capital and financial account recorded a surplus of US$3.3 billion based on higher inflows from foreign direct investments, portfolio flows, and the IMF-SDR allocation.

Significant inflows into the financial and capital account in 2021, more than offset the deficit in the current account, resulting in an overall Balance of Payments surplus of US$510 million compared with a surplus of US$377.5 million recorded in 2020, BoG stated.

Improved reserve position

The country’s reserve position also improved last year resulting in a rise in the import cover. Data from the BoG show that Gross International Reserves as at December 2021 stood at US$9.7 billion (equivalent to 4.4 months of import cover).

This compares with a reserve position of US$8.6 billion (4.0 months of import cover) at the end of 2020. This means the country’s gross international reserves increased by 12.8 percent last year.

The Bank of Ghana hinted that the Gross Reserves have since increased to US$9.9 billion as at 28th January 2022. The strong reserve position, BoG said, provided some buffers for the local currency in 2021.

Cumulatively, while the Ghana Cedi depreciated by 4.1 percent and 3.1 percent against the US Dollar and Pound Sterling, respectively in 2021, the Ghana Cedi appreciated by 3.5 percent against the Euro.

In the same period of 2020, the Ghana Cedi recorded depreciations of 3.9 percent, 7.1 percent, and 12.1 percent against the US Dollar, the Pound Sterling, and the Euro, respectively.