Ghana’s international reserves have come under significant pressure in recent months as heightened tensions in the Middle East and other global developments increased demands on the country’s external buffers.
Governor of the Bank of Ghana (BoG), Dr Johnson Asiama, said the challenging global environment had contributed to a US$1.2 billion decline in the country’s reserves, stressing the importance of maintaining adequate buffers to absorb external shocks.
“The past three to four months have been quite challenging for us when it comes to the country’s international reserves,” Dr Asiama said.
He added: “I am therefore not surprised that we lost US$1.2 billion reserves.”
Data contained in the Bank of Ghana’s July Economic and Financial Data showed that Ghana’s international reserves declined from US$14.1 billion to US$12.9 billion.
Dr Asiama disclosed this during the second edition of “Time with the Governor”, an engagement with students from the Department of Economics of the University of Ghana and the University of Ghana Business School (UGBS).
The engagement formed part of the 131st Monetary Policy Committee (MPC) meetings and was organised under the MPC Educational Observership Programme.
The Governor said the recent decline highlighted the importance of building strong international reserves during periods of economic stability so that the country could rely on them when confronted with unexpected external shocks.
He said Ghana’s decision to accumulate substantial reserves last year had provided an important cushion during the current period of heightened uncertainty.
“This is why we can say that one of the good things we did last year was to build some high reserves for interesting times like this,” he said.
According to Dr Asiama, maintaining adequate reserves was essential to safeguarding the economy against external pressures and providing the central bank with the capacity to respond when global developments adversely affected the country.
He acknowledged that managing such pressures often required difficult policy choices, particularly when countries were confronted with shocks originating outside their control.
Dr Asiama said rebuilding the reserves would require Ghana to strengthen its capacity to generate foreign exchange, particularly through exports.
He identified cocoa and non-traditional exports as key areas with significant potential to increase the country’s foreign exchange earnings.
He noted that non-traditional exports currently account for about 10 per cent of Ghana’s total exports, arguing that the share should be increased to 15 per cent.
A stronger non-traditional export sector, he said, would help diversify Ghana’s sources of foreign exchange and reduce the country’s vulnerability to external economic shocks.
The Governor also identified remittances as another important source of foreign exchange that could contribute to reserve accumulation and broader economic development.
He said Ghana receives more than US$8 billion in remittances annually, but stressed the need to channel a greater proportion of those funds into productive investments rather than consumption.
According to him, productive use of remittances could help expand economic activity, strengthen domestic capacity and improve the country’s foreign exchange position.
The latest reserve pressures therefore reinforce the need for Ghana to deepen its export base, attract sustainable foreign exchange inflows and maintain adequate external buffers to withstand future global shocks.
Source: businesspostonline
