Ghana current account gap widens 16% to USD 5.7bn in 2013

By bne IntelliNews April 10, 2014

Ghana’s current account deficit widened by 16.1% y/y to USD 5.7bn in 2013 mainly due to a large expansion of the deficit on the services account that offset a narrowing trade gap, preliminary data by the central bank showed. The 2013 current account gap equals to 13.6% of GDP, according to IntelliNews calculations.

The services deficit more than doubled to USD 2.4bn last year from USD 975mn in 2012, offsetting contractions in the trade and income balances.

The trade deficit of the country, which is a major exporter of gold, cocoa and oil, narrowed 8.6% y/y to USD 3.8bn in 2013, reflecting a 1.5% growth in exports and a 0.9% decline in imports. A 30.5% jump in crude oil exports was largely offset by a 19.9% drop in cocoa exports and a 12% decline in gold sales, reflecting weak prices. The Bank of Ghana noted that the value of goods exported in Q4 2013 increased 15.9% y/y to USD 3.4bn following a 16.4% decline in Q3 2013. The increase was mainly attributed to a boost in export earnings from gold and cocoa. Imports rose 4.9% y/y to USD 4.5bn in Q4 2013, driven by a 27.2% jump in oil and gas imports.

In February, the International Monetary Fund (IMF) said that Ghana’s widening current account deficit was caused by the high fiscal deficit, which reached an estimated 10.8% of GDP in 2013, exceeding the government’s 9% target, coupled with weak external environment. The fund called for urgent measures to address macroeconomic imbalances and warned that in the absence of further measures, the government's 6% fiscal deficit target for 2014 will be at risk, which, combined with a weak outlook for gold prices, will also keep the current account deficit at high levels.

Ghana’s total outstanding external debt stock reached USD 11.3bn at the end of 2013, accounting for some 27% of GDP, the central bank said. The country’s high fiscal and current account deficits present a major trouble for investors in its Eurobonds, as they spark concerns over the government’s ability to service its debt.

In July 2013, Ghana sold a USD 750mn 10-year Eurobond, its second, amid strong demand with bids worth USD 2.2bn. The coupon was set at 7.785%, but the issue was priced to yield 8%. In March 2014, Ghana shelved a plan to issue another Eurobond, worth up to USD 1bn, saying it can not achieve its target to pay a maximum cost of 8% under current market conditions.

Balance of payments, USD mn 2013 2012 2013/2012 change 2011
CURRENT ACCOUNT -5,704 -4,911 16.1% -3,541
Trade Balance -3,848 -4,211 -8.6% -3,052
-Exports 13,752 13,552 1.5% 12,785
--cocoa beans & products 2,267 2,829 -19.9% 2,871
--gold 4,965 5,643 -12.0% 4,920
--crude oil 3,885 2,976 30.5% 2,779
-Imports 17,600 17,763 -0.9% 15,838
Services Balance -2,444 -975 150.7% -1,856
Income Balance -1,351 -2,130 -36.6% -1,230
Transfers 1,939 2,405 -19.4% 2,597
FINANCIAL AND CAPITAL ACCOUNT 4,892 3,651 34.0% 4,479
-Capital Transfers 20 283 -92.9% 445
-Direct investments 3,226 3,293 -2.0% 3,222
-Other investments 1,646 74 2124.3% 812
Changes in international reserves 1,166 1,211 -3.7% -547
Source: Bank of Ghana        

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