Friday, 17 September

H1-2021 records US$837.5m trade surplus, US$11bn Gross Int’l Reserves

Ken Ofori-Atta

The  provisional  Trade  Balance  for  first  half  of  the  year  (January  to  June) recorded a surplus of US$837.5 million (1.2% of GDP), lower than the surplus of US$1,005.5 million (1.5% of GDP) recorded in the corresponding period of last year, Finance Minister Ken Ofori-Atta has said.

The lower trade balance was attributed to higher imports demand which outweighed export earnings, he told parliament when he presented the mid-year budget review on Thursday, 29 July 2021.  

The  total  value  of  merchandise  exports recorded for  the  first  six  months  was  US$7,593.2  million, which  represented 2.7 per cent annual growth, he reported. 

The increase in exports earnings during the period was mainly on the back of a rally in the prices of key export commodities, Mr Ofori-Atta explained. 

At the same time, imports rose by 5.7 per cent to US$6,755.6 million, reflecting a pick-up in economic activity following the easing of COVID-19 restrictions, he noted. 

Both non-oil  imports  and  oil  imports  contributed  to  the  increased  demand  for imports, the minister noted.  

The Current Account in Q2-2021 recorded a deficit of US$926.1 million (1.3% of GDP) compared to a deficit of US$548.2 million (0.8% of GDP) in the same period  in  2020,  mainly  on  account  of  declining  trade  surplus  and  increased investment income outflows. 

“Private individual transfers remained resilient with net inflow of US$1.6 billion in the first half of the year, despite the uncertain global environment”, Mr Ofori-Atta noted.  

However,  despite  the  surplus  in  the  trade  account,  the current  account  recorded  a  deficit  mainly  because  of  higher  outflows  in  the services and income accounts, he announced.  

Also, the Capital and Financial Account recorded an inflow of US$3,333.2 million in Q2-2021  compared  with  US$1,613.9  million  in  Q2-2020,  driven  by  higher portfolio  and  foreign  direct  investments  inflows.  

The  lower  current  account deficit and higher inflows into the capital and financial accounts resulted in an overall  balance  of  payments  surplus  of  US$2,369.7  million  compared  to  a surplus of US$1,009.9 million in the corresponding period of 2020, he contrasted.  

As of the end of June 2021, the minister revealed that the country’s Gross International Reserves (GIR) stood at US$11,026.9 million from a stock position of US$8,624.4 million at the end of December 2020.  

He said this was sufficient to provide a cover of 5.0 months for imports of goods and services compared with 4.3 and 4.0 months of import cover recorded at end-June and end-December 2020, respectively. 

In  the  outlook,  the  thrust  of  external  sector  policy  will  be  to  build  sufficient reserves to provide at least four months cover for imports of goods and services and to support the forex market to smoothen out fluctuations, he said. 

Improvement in the  trade  account  and  strong  remittances  inflows,  together  with  portfolio inflows occasioned by  continued access to the international financial market, will be required to secure a strong external position, Mr Ofori-Atta added. 

Gradual  recovery  in  global  output,  driven  mainly  by  progress  with  mass vaccinations,  will  support  commodity  prices, he added.  

“As  a  result,  we  expect  exports growth to be strong and underpin the improvement in the trade account. This is  in  spite  of  the  revival  of  imports  occasioned  by  the  projected  recovery  in economic activity. We expect the current account deficit to remain stable in the medium-term”. 

“This, together with improvements in the financial account will help secure a strong external position to cushion the economy against shocks”.