Ghana: Cocoa prices surge – BoG Governor

 

The Governor of the Bank of Ghana, Dr. Ernest Addison, recently reported on the prices of Ghana’s major export commodities - cocoa, gold, and crude oil - in the first half of the year.

He mentioned that cocoa prices have surged to record highs, last seen over ten years ago. This increase was due to tight supplies from West Africa and expectations of a global deficit in the 2022/2023 crop season. As of June 2023, cocoa beans gained 25.5 percent, settling at US$3,185.29 per tonne.

Dr. Addison also highlighted that the Bank of Ghana has built up US$1 billion in reserves from its gold purchase program and settling short-term liabilities. This has led to an improvement in Gross International Reserves, reaching US$2,353.95 million, equivalent to 1.1 months of import cover, compared to US$1,440.0 million at the end of December 2022.

The Bank’s Domestic Gold Purchase Program, launched in June 2021, aims to boost the country’s foreign reserves by purchasing domestically produced gold and converting it into foreign assets. Since its inception, a total of 7.73 tons of monetary gold, valued at approximately US$480 million, has been added to the reserves under this program, surpassing the target of doubling gold holdings in 5 years.

Dr. Addison also discussed international benchmark crude oil prices, which decreased by 7.8 percent in the year, closing at US$74.98 per barrel. This was due to concerns about sluggish global growth and reduced energy demand. However, decisions by OPEC+ to deepen production cuts helped moderate the losses.

Moreover, the price of gold increased by 8.1 percent year-to-date, reaching US$1,942.07 per fine ounce. This was driven by increased fears over a global recession, possible slower interest rate hikes in the United States, and higher demand for the metal from China.

During the first six months, Ghana’s trade balance significantly improved to a surplus of US$1.8 billion, compared to US$1.5 billion the previous year. This was mainly due to a decline in imports (13.4 percent) outweighing a drop in export earnings (7.9 percent).

The decline in total export earnings was primarily due to lower earnings from crude oil. However, higher gold and cocoa exports helped to moderate the losses. Crude oil exports dropped by 41.3 percent to US$1.7 billion, driven by lower production volumes from certain oil fields and a decline in world prices. In contrast, gold exports increased by 14.2 percent to US$3.5 billion.

Overall, the trade surplus, lower external debt service payments, and reduced net outflows in the financial accounts resulted in a current account surplus of US$849.2 million. This is compared to a US$1.1 billion deficit recorded a year earlier. Similarly, the capital and financial account recorded a reduced net outflow of US$897.3 million.