The US has cut aid to the United States Agency for International Development (USAID)
Ghana’s current account surplus, a vital economic buffer, is projected to decline by 3 per cent in 2025, according to ratings agency Fitch.
The contraction is linked to the United States’ decision to cut aid to the United States Agency for International Development (USAID) by 90 per cent.
Fitch noted that international aid is a key source of foreign exchange for African countries, including Ghana, which currently makes up half of all net transfers to the account.
Historically, the US has contributed about a fifth of Ghana’s total aid receipts.
USAID has supported sectors such as health, education, agriculture, and governance, and its funding cut could disrupt services and development efforts.
While increased remittances and aid from other donor countries may offset some losses, Fitch stated they would not fully compensate for the sharp decline.
Despite the expected drop in US aid, Ghana’s external stability is projected to be stronger in 2025 compared to the previous five years.
“The nation’s reserve position experienced a considerable weakening between 2021 and 2023, primarily driven by rapid outflows from the capital and financial accounts,” the report noted.
Fitch attributed this to global economic uncertainties following the Russia-Ukraine conflict, interest rate hikes in developed economies, and investor concerns over Ghana’s rising debt burden.
However, Ghana’s gross international reserves showed recovery in 2024, reaching USD 6.4 billion by December, the highest in three years.
“This improvement has been supported by a substantial current account surplus, continued disbursements from the International Monetary Fund (IMF), and a decrease in financial outflows,” the agency explained.
Fitch expects this positive trend in reserves to continue in the coming months.
Investor confidence, strengthened by Ghana’s completed debt restructuring, is expected to drive capital inflows.
Combined with a sustained current account surplus, international reserves are forecast to reach USD 8.8 billion by the end of 2025, providing approximately 3.5 months of import cover.
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