Oil price surge threatens Ghana’s balance of payments
By Kofi AHOVI
The rise in crude oil prices to around US$80 per barrel last week, with the likelihood of further rises, at least in the short term, is threatening to significantly increase Ghana’s import bill and put pressure on the country’s already tenuous balance of payments position.
Although the Ministry of Finance has declined to make public the average crude oil price on which its projections for 2010 have been made, senior economic planning officials are said to be uncomfortable by the current price surge.
Indeed, only last month, the Bank of Ghana’s Monetary Policy Committee warned that rising crude oil prices on the international market pose a risk to Ghana’s efforts at restoring macro-economic stability.
Crude oil prices are currently at a 17 month high and are expected to rise further over the coming months, as the global economic recession recedes and is replaced by an economic recovery that will intensify demand for energy, especially among the world’s fastest growing, oil import dependent economies such as China.
Ghana’s economic managers are thus being haunted by the spectre of 2008 when crude oil prices spiked to a record high of US$147 a barrel, pushing the country’s oil import bill to US$2.4 billion.
The subsequent crash in oil prices to barely a third of the 2008 high, through most of last year in the face of the global economic recession and a resultant slump in demand for energy was largely responsible for Ghana’s ability to cut its oil import bill for 2009 to just US$105 million.
Instructively, during the oil price spurt of 2008, crude oil imports accounted for over 23% of the total merchandise import bill of US$10.3 million, compared with just 18.5% of the lower total merchandise import bill of US$8.1 million last year, which illustrates just how debilitating relatively high crude oil prices can be on Ghana’s balance of payments position.
Indeed, the lower import bill for crude oil last year contributed significantly to the fall in the country’s merchandise trade deficit to US$2.2 billion from US$5.0 billion recorded in 2008, a year in which the external current account deficit reached a record high 20% of Gross Domestic Product.
Last year, Ghana received US$200 million from the International Monetary Fund as the first tranche of a US$597 million balance of payments support facility to stem the country’s deteriorating external position, which showed up in the sharp depreciation of the cedi.
Subsequent tranches are to be distributed between this year and 2012, although this will depend on Ghana’s ability to put its external account in order, a requisite condition now under renewed threat from rising crude oil prices.
By Kofi AHOVI
The rise in crude oil prices to around US$80 per barrel last week, with the likelihood of further rises, at least in the short term, is threatening to significantly increase Ghana’s import bill and put pressure on the country’s already tenuous balance of payments position.
Although the Ministry of Finance has declined to make public the average crude oil price on which its projections for 2010 have been made, senior economic planning officials are said to be uncomfortable by the current price surge.
Indeed, only last month, the Bank of Ghana’s Monetary Policy Committee warned that rising crude oil prices on the international market pose a risk to Ghana’s efforts at restoring macro-economic stability.
Crude oil prices are currently at a 17 month high and are expected to rise further over the coming months, as the global economic recession recedes and is replaced by an economic recovery that will intensify demand for energy, especially among the world’s fastest growing, oil import dependent economies such as China.
Ghana’s economic managers are thus being haunted by the spectre of 2008 when crude oil prices spiked to a record high of US$147 a barrel, pushing the country’s oil import bill to US$2.4 billion.
The subsequent crash in oil prices to barely a third of the 2008 high, through most of last year in the face of the global economic recession and a resultant slump in demand for energy was largely responsible for Ghana’s ability to cut its oil import bill for 2009 to just US$105 million.
Instructively, during the oil price spurt of 2008, crude oil imports accounted for over 23% of the total merchandise import bill of US$10.3 million, compared with just 18.5% of the lower total merchandise import bill of US$8.1 million last year, which illustrates just how debilitating relatively high crude oil prices can be on Ghana’s balance of payments position.
Indeed, the lower import bill for crude oil last year contributed significantly to the fall in the country’s merchandise trade deficit to US$2.2 billion from US$5.0 billion recorded in 2008, a year in which the external current account deficit reached a record high 20% of Gross Domestic Product.
Last year, Ghana received US$200 million from the International Monetary Fund as the first tranche of a US$597 million balance of payments support facility to stem the country’s deteriorating external position, which showed up in the sharp depreciation of the cedi.
Subsequent tranches are to be distributed between this year and 2012, although this will depend on Ghana’s ability to put its external account in order, a requisite condition now under renewed threat from rising crude oil prices.
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