An International Ratings Agency, Fitch Ratings in its assessment of forex reserves in sub-Saharan Africa has indicated that international reserves held up by SSA sovereigns generally saw an improvement despite the severe shock from the COVID-19 pandemic disease.

According to Fitch Ratings, although reserves were held up well, official international reserve positions of sub-Saharan African (SSA) sovereigns deteriorated only mildly in even the worst cases.

This surprising resilience, which can also be observed in some other regions, in Sub-Saharan Africa reflects currency depreciation, import compression, official creditor support and valuation effects.

Furthermore, some level of substantial deprecation was experienced among some of the region’s sovereigns. Some of the worst-hit sovereigns such as Angola and Seychelles, as well as sovereigns already in difficult circumstances before the pandemic such as Zambia, allowed their currency to absorb much of the shock. Most notably, the Angolan kwanza’s slid against the USD showing no signs of abating, while the South African Rand continued to recoup some of the heavy losses it has taken since the outset of 2020.

Meanwhile, some other countries experienced lower depreciation of their currencies. An example is Ghana, which experienced currency depreciation from January to December of less than 5 percent, a rate far better than an 8.33% loss for the same period in 2019.

With regards to the import position of sovereigns in the region, Fitch noted that imports of goods for many countries in the region fell much more sharply than exports. For example, exports from January to November 2020 in South Africa fell 6.6 percent year-on-year, while imports dropped by 23.6 percent.

The decline in imports was undergirded by the imposition of lockdowns notably in South Africa, tightened or continuing restrictions on foreign exchange in Nigeria and the Central African Economic and Monetary Community (CEMAC). Other reasons include the general hit to domestic incomes from the pandemic and, for oil importers, lower hydrocarbon prices.

This helped contain, and in some cases over-compensated, the hit from lower commodity prices and tourism revenue.

In Q2 of 2020, precisely in April, when the health effects of the pandemic turned critical and restrictions and lockdowns were imposed, available data shows that Ghana’s international reserves increased from $8.4 billion dollars at the end of 2019 to $10.4 billion.

Also, remittance flows varied, with a sharp fall in second Quarter in Nigeria and Uganda but broad stability in most other major recipients, although the hit could still materialize. Based on data from the World Bank, remittances to sub-Saharan Africa registered a small decline of 0.5 percent to $48 billion in 2019.

However, due to the COVID-19 crisis, remittance flows to the region were forecasted to decline by 23.1 percent to reach $37 billion in 2020, while a recovery of 4 percent was expected in 2021. Also, Fitch Ratings estimates that current account balances in 2020 improved in only five out of 19 sovereigns in the region.