Ghana’s overall balance of payments is forecasted to return to surplus in the years 2023 and 2024, following a significant deficit of $4.6 billion recorded in 2022.
According to Fitch Solutions, this reversal is attributed to expected positive developments in the capital and financial account, as well as improved investor sentiment and debt restructuring efforts.
The record-wide deficit in 2022, the first in 20 years, was influenced by investor concerns about Ghana’s debt dynamics and monetary tightening in developed markets.
However, the capital and financial account is predicted to regain a positive balance in 2023 as the country receives disbursements of $600 million each from the International Monetary Fund (IMF) under its Extended Credit Facility.
Looking ahead to 2024, Fitch Solutions anticipates an enhancement in investor sentiment due to progress in restructuring Ghana’s external debt. This positive sentiment is projected to boost capital inflows and largely offset a minor current-account deficit expected in 2024.
The Bank of Ghana’s Summary of Economic and Financial Stability Report for July 2023 highlighted that the country’s Balance of Payment at the end of June 2023 demonstrated a deficit of $107.8 million, representing about 0.1% of GDP.
This is a substantial improvement compared to the deficit of $2.49 billion recorded during the same period in 2022. The current account balance stood at $849.2 million, equivalent to around 1.1% of GDP in April 2023.
Despite the positive outlook, Fitch Solutions acknowledges significant risks to Ghana’s external position. It noted that potential stall in negotiations between Ghana and its external creditors could weaken investor confidence, potentially leading to capital flight.
Such a scenario would put pressure on the country’s foreign exchange reserves and currency (cedi), possibly resulting in higher inflation, which in turn could negatively impact economic growth and social stability.