Huge Trade Deficit: Industry Unhappy

Captains of industry have expressed concerns about Ghana’s balance of trade position which is highly in favour of imports and therefore eating up the country’s foreign reserves and aggravating the country’s economic situation.

They are worried Ghana’s economy will make no significant progress if innovative policies are not taken to strengthen the country’s exports and reduce the deficit.

According to the Head-Operations & Information Technology at Ecobank Ghana, Mr Fiifi Brandful, “there is too much importation and very little exportation; when I look at the figures and graphs that we process, it’s all imports; if we do not reverse the trend of all importation and no exports, things will be dire for this country.”

“We keep relying on foreign goods and lose the much needed foreign currency and when we run short of foreign currency we can only get them at higher rates which becomes detrimental to our economy,” he told importers during a workshop in Tema.

The first nine months of 2015 showed a deficit in trade of US$2,340.3 million up from US$710.7 million recorded during the same period in 2014.

The deficit more than doubled to $1559.7million in the last quarter of December 2015 from $676million same period in 2014.

The concerns of most captains of industry is to do with the fact that Ghana continues  to import food items which can be produced locally with the appropriate support mechanisms in place.

Chief Executive Officer (CEO) of Dalex Finance and Leasing Company, Mr Kenneth Thompson has recently warned the country will continue to experience depreciation of its local currency if Ghana is unable to stem the unbridled culture of importation.

The country between 2013 and 2014 spent $900million to cover the importation of food items which can be produced locally.

A major policy thrust of government was to increase the local production of rice and substantially cut rice imports.

Regrettably, the importation of rice alone has increased steadily over the years.

Ghana spent $485.6million on rice imports in 2011. This increased to $511million in 2012, declined to $467million in 2013 and rose sharply to $600million in 2014.

Additionally, there has been a steady increase in the importation of livestock and poultry products; from 128,000 metric tons in 2008, to 139,000 tons in 2011. The country spent $160 million in 2013 and $283 million on imported fish.

Trade Finance Products Manager at Ecobank Ghana, Mr Lennon Nasamu said banks should be willing to offer support to credit-worthy customers engaged in exports.

“Banks should be seen to support initiatives that promote exports; where customers are credit worthy they should be supported with financing,” he said. 

He made a passionate appeal to businesses to venture into exports which he said could have better returns. 

Other analysts this paper spoke to said Ghana could reduce the trade deficit by first expanding its exports and then reducing imports. 

They however cautioned against the sudden reduction in imports, saying it could spell doom for the economy.

“Even though import restriction policies such as higher tariffs on imports licencing and other regulations could show immediate results, hurried import restriction policies could have an even more serious impact on the economy, “Economist and Senior Lecturer at the University of Cape Coast, Dr John Gatsi said. 

Since the economy is largely import-based, such policies can lead to shortage of essential commodities, higher inflation, falling standards of living and falling government revenue among others.

According to Dr Gatsi, Ghana can do very little or nothing about the importation of intermediary goods since they serve as raw materials for the country’s industrial and telecommunications sector and “we do not have the capacity to produce those materials here.”

He called for a multi-sectoral approach to dealing with the country’s trade deficit, noting that Ghana’s exports strategy should not stop at just adding value to the country’s traditional products but diversification of exports should be key.

He stressed  the need for the country’s foreign missions to be empowered to serve as trade and investment outlets for the country.

Dr Gatsi stressed the need for government to encourage research institutions and universities to come out with technologies and innovations that can help drive the country’s export sector. 

Dr Godfred Bokpin of the University of Ghana Business School maintains that efforts at transforming the structure of the economy will not yield the desired results if the exports-led strategy fails to make local firms more competitive.

This, he said, could be done through capacity building of local firms, increased access to capital and training among others.

It will be recalled that the 2015 budget statement outlined among other measures that Ghana’s successful structural transformation will rest on strategic interventions including promoting export-led growth through products that build up on Ghana’s comparative strength in agricultural raw materials.