Gold rush
Ghana's gross international reserves rose to $8.982 billion in December 2024.
Ghana’s gross international reserves rose by $1.101 billion in December 2024, reaching $8.982 billion (four months of import cover). The trade surplus surged to $4.98 billion, driven by a 53.15% rise in gold exports to $11.64 billion, while oil and cocoa exports fell. Total exports grew 21.06% to $20.22 billion, with imports at $15.24 billion. The Bank of Ghana maintained its 27% interest rate, expecting inflation to decline with fiscal consolidation under the new government. Additionally, Ghana plans to launch a Gold Board to streamline small-scale gold purchases, boost earnings, and curb smuggling, according to Finance Minister Cassiel Ato Forson.
Ghana’s economy is on a path to gradual recovery after enduring one of its worst economic crises in 2022. That year, inflation skyrocketed to a peak of 54%, eroding consumer purchasing power and severely impacting businesses. At the same time, foreign exchange reserves dwindled, leaving the country with less than two months of import cover—an alarming situation that heightened investor concerns and exacerbated capital outflows. The worsening macroeconomic conditions forced the government to seek financial assistance from the IMF, leading to a $3 billion bailout agreement to restore stability.
A critical aspect of the IMF programme was implementing a stringent debt restructuring process, which saw Ghana renegotiating its obligations with domestic and external creditors. These efforts helped stabilise inflation, ease liquidity pressures, and rebuild the country’s external reserves. However, despite these improvements, significant vulnerabilities persist. The Bank of Ghana, for instance, was unable to meet its 2024 inflation target, as year-end inflation remained above 20%, driven by a combination of domestic and external factors. To contain inflationary pressures and maintain investor confidence, the BoG kept its monetary policy rate at a high of 27%, reflecting the delicate balance between controlling price increases and sustaining economic growth.
While Ghana’s foreign exchange reserves have increased under the IMF-supported programme, they have yet to return to pre-crisis levels. In 2021, reserves exceeded $11 billion, providing a more substantial buffer against external shocks. Although progress has been made, current reserves remain below that benchmark, leaving the economy susceptible to global commodity price fluctuations and currency volatility. On the positive side, the IMF programme continues progressing smoothly, with disbursements arriving as scheduled, ensuring that Ghana meets its external financing needs. Debt relief has also played a crucial role in stabilising the economy. The government successfully secured an agreement with Official Creditors, culminating in the signing of an MoU that grants approximately $2.9 billion in debt servicing relief until 2026.
Additionally, Ghana has benefited from a temporary moratorium and an extensive debt restructuring process of over $9.2 billion. However, as of this year, the country will begin resuming some of its external debt servicing obligations, gradually phasing out the relief measures that have provided short-term fiscal breathing space. Despite these efforts, Ghana’s fiscal position remains constrained, with revenue generation continuing to be challenging. Key foreign exchange earners, particularly cocoa, have underperformed, failing to reach their usual annual revenue of approximately $2 billion. The cocoa sector, a traditional pillar of the Ghanaian economy, has faced multiple setbacks, including climate-related disruptions, smuggling, and lower global prices.
Recognising the need to diversify foreign exchange sources, the new administration led by President John Dramani Mahama has introduced several initiatives aimed at strengthening reserves and ensuring currency stability. One of the key policy measures is the establishment of the Ghana Gold Board, which is expected to play a central role in regulating gold purchases. Gold remains a vital export commodity for Ghana, and this initiative aims to streamline gold transactions, curb illicit trade, and maximise foreign exchange inflows. By leveraging gold revenues more effectively, the government hopes to shore up external reserves, stabilise the Ghanaian cedi, and create a more resilient economic framework. Ghana’s economic recovery will depend on its ability to maintain fiscal discipline, implement structural reforms, and sustain investor confidence. While the IMF-backed policies have provided temporary relief, the country must address underlying economic weaknesses, including revenue mobilisation, debt sustainability, and currency stability, to achieve long-term financial resilience.