By Samuel Lartey(Prof)
In December 2024, Ghana experienced a pivotal moment in its economic journey. The country’s gross international reserves surged by US$1.101 billion, reaching a remarkable US$8.982 billion—equivalent to 4.0 months of import cover.
This sharp increase was a result of a higher current account surplus and a reduction in net financial outflows, according to the Bank of Ghana’s Summary of Economic and Financial Data.
For a country that faced significant economic headwinds in recent years, this development is more than just a numerical victory—it is a lifeline to stability and a foundation for future growth. As Ghana stands at this economic crossroads, what does this reserve boost mean for the government, corporations, businesses, entrepreneurs, and citizens?
A Boost for Government Initiatives
The improved reserves come at a crucial time for the government, whose ability to fund critical initiatives has been strained under the weight of GH₵575 billion in public debt as of October 2024.
The reserves strengthen Ghana’s creditworthiness on international markets, potentially reducing borrowing costs and enabling access to cheaper capital. This is particularly significant as Ghana works to repay its US$3 billion IMF loan, secured in 2023 while meeting domestic and external debt obligations.
The reserve growth also empowers the government to fund flagship programs like the Ghana CARES “Obaatan Pa” Program, which aims to accelerate economic recovery and transformation post-COVID-19. Additionally, initiatives such as the Agenda 111 Hospitals program could gain renewed momentum as the government now can import critical medical equipment and materials.
Furthermore, the stability of the reserves has bolstered the local currency, with the cedi appreciating by 2.1% against the dollar in December 2024. This creates room for the government to implement policies that directly benefit the citizenry, such as subsidies on fuel and utilities, easing the financial strain on households and businesses alike.
Stability for Large Corporations
For corporations, the reserve surge translates into reduced economic uncertainty. In 2023, inflation soared to 54.1%, creating an unpredictable business environment that drove up costs and reduced profits. By December 2024, inflation had dropped to 39.2%, providing a more stable environment for planning and investment.
This stability is particularly beneficial for industries reliant on imports, such as manufacturing and energy. For instance, mining companies like Gold Fields in Ghana, which account for a significant portion of the country’s foreign exchange earnings, can now access foreign exchange more predictably, reducing operational risks.
The banking sector, too, stands to benefit from the Central Bank’s increased ability to intervene in the foreign exchange market, ensuring liquidity and stability in financial transactions.
Opportunities for Entrepreneurs
Entrepreneurs, often the lifeblood of Ghana’s economy, are among the biggest beneficiaries of the improved reserves. Access to foreign exchange at more stable rates enables small and medium-sized enterprises (SMEs) to import raw materials, machinery, and technology essential for growth.
For example, entrepreneurs in the agritech sector, which has seen significant growth due to digital tools for farming, can expand their operations without the fear of exorbitant import costs.
Additionally, the reduced cost of doing business could stimulate growth in e-commerce and technology startups. In 2021, mobile money transactions exceeded GH₵1.2 trillion (US$100 billion), highlighting the potential of the digital economy.
Improved reserves and a stable economy provide the ideal conditions for entrepreneurs to innovate and scale their businesses, contributing to job creation and economic diversification.
Relief for the Citizenry
The reserve surge offers a glimmer of hope for ordinary Ghanaians, who have borne the brunt of inflation and economic hardship. In 2023, food prices increased by 122%, making basic commodities unaffordable for many. However, as reserves stabilize the cedi, the cost of imported goods such as rice, cooking oil, and pharmaceuticals is expected to decline, easing the financial burden on households.
Moreover, improved reserves create the fiscal space for expanded social programs. For instance, the government could allocate more resources to initiatives like the Free Senior High School (FSHS) program, which benefited over 1.6 million students in 2023, or enhance healthcare services in underserved areas. These measures would not only improve living standards but also boost public confidence in the government’s ability to manage the economy effectively.
Sustaining the Momentum
While the reserve growth is commendable, sustaining it requires deliberate action. The government must continue to diversify export revenues beyond traditional commodities like gold and cocoa, which contributed 40% and 20% of export earnings, respectively, in 2024. Investments in sectors like solar energy, manufacturing, and agriculture value chains are essential for creating sustainable inflows of foreign exchange.
Fiscal discipline will also be key. With debt servicing accounting for 70% of government revenue in 2024, cutting wasteful expenditures and improving tax collection efficiency are critical. For instance, the E-Levy, though initially met with resistance, has shown potential to increase domestic revenue when implemented effectively.
Conclusion: A Collective Responsibility
Ghana’s gross international reserve surge is a testament to the resilience of the nation’s economy and the effectiveness of policy measures aimed at stabilizing the external sector. However, the true measure of success lies in how these gains are translated into tangible benefits for all stakeholders.
For the government, this is an opportunity to invest in transformative programs that uplift the nation. For corporations and businesses, the stability provides a platform for growth and innovation.
For entrepreneurs, the improved economic climate offers new opportunities to thrive. And for the citizenry, it is a chance to experience a reprieve from inflationary pressures and an improved standard of living.
As Ghana faces forward, the reserve growth is a reminder of what can be achieved through strategic planning, fiscal discipline, and collective effort. The challenge now is to build on this foundation to ensure long-term economic resilience and inclusive growth, creating a future where every Ghanaian can share in the nation’s prosperity.
