Ghana could potentially be staring at a dollar shortage by the end of the year. According to the International Monetary Fund regional economic outlook report for Sub-Sahara Africa, Ghana’s net international reserves are expected to end 2023 at a record low.
The report shows that Ghana’s net international reserves will end 2023 at nearly three weeks of import cover (0.8 month). This is a sharp contradiction from the Bank of Ghana’s Economic and financial data. According to the central bank, Ghana’s reserves for 2022 were estimated at 2.7 months of import cover.
The Bank of Ghana has had a positive outlook on the state of international reserves. In its March 2023 summary of economic and financial data, the bank said Ghana’s international net reserves recorded slight improvement that are expected to hit 2.62 billion dollars, equivalent to 2.8 months of import cover in February 2023.
With the worrying IMF data out, the country now holds its breath as it waits for the IMF’s approval of the 3-billion-dollar loan. In anticipation of the IMF’s nod of approval, the country has enacted an aggressive revenue mobilization mechanism. Through parliament, 3 new tax bills were passed that will see businesses pay more taxes.
Speaking to local media, Finance Minister Ken Ofori- Atta says the taxes were a necessity. “With parliament having approved the new tax bills, Ghana has met most of the conditionalities from the IMF. We now await financial assurance from the Paris club in the next few weeks. The Managing director has assured me that once she receives the assurance, she shall forward it to the board for approval.”
Following Ghana’s default of interest payment on foreign loans in December 2022, its access to the international market has been limited. This is even though the country has been on a downward economic spiral in 2022 and is in dire need of capital injection. Now, the minister says the country will catch on straws such as IMF for survival stating that it will take two to three years to get back to the international market.
Considering the IMF revelation, any further delays or cessation of foreign inflows in Ghana could result in a dollar shortage. As seen in a country like Kenya which has had its fair share of dollar shortages, the local currency could lose margin to the dollar. The business could also slow down as entrepreneurs depend on bulk dollar transactions to import goods into the country.
Ghana’s International net reserves balance is concerning as only Zimbabwe (0.2 months), South Africa (0.5 months), and Ethiopia (0.6 months) in Sub-Saharan Africa are projected to have a lower import cover than Ghana in 2023.
However, the report points to a turnaround in 2024. The IMF is optimistic that Ghana’s reserves will increase to 1.7 months of import cover.