The suspension of external debt service by the government helped the current account balance into surplus.

According to data from the Bank of Ghana, the trade surplus widened in the first 4-months of 2023, hitting $1.6 billion (2.2% of Gross Domestic Product) compared to the ¢1.2 billion (1.6% of GDP) recorded in the same period last year.

The wider trade surplus was supported by a sharper compression in total imports to $4.0 billion (-13.9% year-on-year) compared to a 3.6% year-on-year decline in total export revenue ($5.6 billion).

The wider trade surplus combined with an improvement in the services accounts swung the current account balance from a deficit in quarter 1, 2022 into a surplus of $661.4 million (0.9% of GDP) in first quarter of 2023.

 The Bank of Ghana attributed the improved services account balance to the suspension of external debt service and higher remittance inflows.

During quarter 1, 2023, inward remittances increased by 16.3% year-on-year to $1.2 billion, combining with the debt service suspension and the trade surplus to churn out a surplus on the current account.

IC Research said “given that ongoing negotiations with external creditors could stretch into late 2023, the suspension of external debt service should anchor the current account balance in 2023. However, a potential resumption of external debt service in 2024 will revive pressure on the current account balance if debt restructuring is not secured ahead of debt service resumption”, it said.

Ghana received the first tranche of the International Monetary Fund cash of $600 million under the ongoing Fund programme.

The forex inflow supported the gross international reserves, according to the Bank of Ghana, to $5.7 billion, equivalent to 2.6 months of import cover as of May 19, 2023.

This IC Research suggests a lingering weak external account buffer with a limited capacity to fund real sector demand, emphasising the vulnerability to exchange rate shocks and a bearish outlook for real GDP growth.