Ghana’s Trade of Vulnerability: Rise of Imports, Fall of the Cedi [Part 1]

Ghana has been facing mounting economic challenges that threaten her growth and stability. At the heart of these challenges lies a troubling economic trend: the sharp rise in imports coupled with the precipitous fall of the Ghanaian cedi. This combination has created a precarious situation, exposing vulnerabilities in the nation’s trade and economic policies.

Ghana’s import bill has been on an upward trajectory for several years. The country’s dependency on foreign goods spans across essential sectors, including food, fuel, machinery, and consumer goods.

This dependency is not inherently problematic; after all, imports are a vital part of any open economy, facilitating access to goods and services that are not produced domestically. However, the scale and growth rate of Ghana’s imports present a significant concern.

The Chief Executive Officer of the Association of Ghana Industries (AGI), Seth Twum Akwaboah attributes the surge in Ghana’s import bill to unfriendly nature of the economic environment to businesses.

According to him, businesses are borrowing from the banks at an interest rate of about 30% coupled with high utility tariffs leading to high cost of production hence production is very low.

He added that there is little or no access to medium to long term funding to expand production on a larger scale. Hence businesses are not able to meet the demands of consumers.

“The economic environment must be friendly to business to ensure competitiveness. We are borrowing at an interest of about 30% and there is no access to medium to long term funding. How do you expect industries to survive in these conditions?”, he questioned.

Mr. Akwaboah opined that addressing these vulnerabilities requires a multi-faceted approach which includes an urgent need to strengthen the local industrial base to ensure competition and sustainability.

“The economic environment must be friendly towards the industries in the form of subsidies, tax incentives, and access to affordable medium to long term funding can help boost production and reduce dependency on imports,” he said.

He was not happy about the inactiveness of the import restrict policy saying” the import restriction policy was a good policy that we should have kept, and it failed because even if you introduce import restriction and you fail to improve the business environment one can’t be competitive.

“Until we do that, we cannot reduce the high import bill which will always continue to have a long run effect of the cedi and that is why the cedi continues to depreciate,” he added.