Declining Gross Reserves is a major cause of worry
It appears that the spirited fight put up by civil society groups and economic think-thanks against excessive spending to safeguard the Ghanaian economy as the country goes into the December elections has not yielded any results.
Statistics from the Central Bank suggests that Ghana’s Gross International Reserves (GIR) has declined significantly from US$4.5 billion in August 2011, to US$4.2 billion at the end of August 2012.
The West African second largest economy’s GIR increased from US$4.7 billion at the end of December 2010, depicting over 3.8 months cover of imports of goods and services, as against the current gross reserves of US$4.2 billion (2.4 months of imports cover) recorded at the end of August 2012.
With the gross reserves of US$4.2 billion, it means that Ghana now has 2.4 months cover of imports of goods and services, as against the reserves of US$4.5 billion recorded in August last year, which covered imports for over three months.
In his recent Monetary Policy Committee (MPC) of the Bank of Ghana (BoG) press conference, the caretaker Governor, Dr Henry Kofi Wampah, stated; “ Total government expenditure, including arrears and other outstanding payments, amounted to GH¢12.5 billion, compared to GH¢7.8 billion in 2011.”
The major components for the first eight months of the year were: wages, salaries and related payments of GH¢6.2 billion, domestic interest payments of GH¢1.1 billion and external interest payments of GH¢300.6 million.
Other payments amounted to GH¢4.9 billion, made up of Ministry, Department, and Agency (MDA) drawings and statutory payments, namely District Assemblies’ Common Fund (DACF), Ghana Education Trust Fund (GETfund), and National Health Insurance Levy (NHIL), among others.
To this end, government fiscal operations during the period, therefore, resulted in an overall cash deficit of GH¢4.1 billion. The deficit, together with a net foreign repayment of GH¢247.1 million and a net payment to DMBs of GH¢478.8 million, created a resource gap of GH¢4.8 billion.
Ghana’s stock of domestic debt at the end of July 2012 stood at GH¢13.7 billion, up from GH¢11.8 billion in December 2011. However, the external debt stock declined marginally, from US$7.8 billion in December 2011 to US$7.7 billion at the end of July 2012.
Total public debt at the end of July 2012 was, therefore, GH¢28.3 billion, equivalent to 44.4 per cent of GDP, up from 42.6 per cent GDP at the end of December 2011, but well within the debt sustainability threshold of 60 per cent of GDP.
From these developments, The Chronicle can boldly say that the imports-dominated Ghanaian economy is heading for a crisis if stringent economic policies are not put in place.
Although, the government promised to cut public spending, we dare say that the cut in public spending cannot save the economy from catching the ghost. This is evident from the fact that more finances are needed to complete the plethora of ongoing government projects dotted cross the 24.7 million ECOWAS-member country.
As it may sound too late, The Chronicle is urging the government to work hard to prevent the economy from hitting the ground. This can be done through prudent economic management.
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