Ghana's trade imbalance

1. Solutions to Ghana’s trade imbalance
The Chief Executive Officer of the Ghana Export Promotion Authority, Mr. Gideon Quarcoo on July
16th 2014 asked Ghanaians to embrace import substitution as a sure solution to tilting Ghana’s
balance of trade in its favour. “Buy, use and sell Ghanaian,” he urged the public, saying it is the
categorical economic imperative to pull out the country from the dearth of trade imbalance.
Running a balance of trade deficit has been a part of Ghana’s history as a result of the country’s heavy
dependence on imports as against exports with its trading partners.
Ghana currently has the following
Balance of trade -24.8Million USD
Capital flows -5.8 Million USD
Crude oil production 104 BBL/D/1K
Current account -953MillionUSD
Current account to GDP 12.3%
Exports 3496.6 Million USD
Gold Reserves 8.74 Tonnes
Imports 3688.6 Million USD
Ghana’s total merchandise trade imports were 0.09% of the total world imports share with a value of
17600 million USD (c.i.f) as opposed to the exports of value 13752 million USD (f.o.b).
Breakdown of economy's total exports
Breakdown of economy's total imports
By main commodity group (ITS)
By main commodity group (ITS)
Agricultural products
42.3
Agricultural products
10.9
Fuels and mining products
24.7
Fuels and mining products
1.50
Manufactures
7.1
Manufactures
43.9
By main destination
By main origin
1. European Union (28)
24.0
1. European Union (28)
31.2
2. Iran
20.4
2. China
22.8
3. South Africa
18.2
3. India
6.1
4. United Arab Emirates
10.7
4. Korea, Republic of
4.5
5. Switzerland
7.5
5. South Africa
4.1
Traditional exports products like gold, timber and cocoa have experienced price fluctuations over the
years, with non-traditional exports recording some modest, albeit less than expected growth.
Over the meeting it was emphasized that to expand the export base the following steps are necessary:
1) Increased productivity to meet the increased demand volumes for enhancing trade base for
exports.
2) Quality enhancement for reaching out to more accessible export markets.
3) Adding value to local products , as there is urgent need to put technology to work for
industries to add value to the products Ghana seeks to market to the outside world particularly
about agro-processing across the broad spectrum of horticultural produce

2. 4) Rolling out non-traditional export portfolios like multi-media, medical, business process
outsourcing.
Exchange rate policy
The exchange rate has been used as a tool for regulating flows of trade and capital by many
developing countries, which tend to have persistent deficits in the balance of payments because of
a structural gap between the volumes of exports and imports. These economies have an inelastic
demand for both exports and imports. Ghana’s policies on the exchange rate have been influenced
by the contrasting political regimes that have been in place since independence in 1957.
1957-1966 Fixed to British pound
1966-1982 Fixed to American dollar
1983-1986 Multiple exchange rate system
1986-1987 Dual exchange rate system- auction
determined, dual retail auction rate
1987-1988 Dutch auction system
1988-1989 Foreign exchange bureaux
1990-1992 Wholesale and inter-bank auction system
1992-2014 Inter-bank market. The Bank of Ghana (BoG)
selling and buying rates were determined by the
average daily retail rates of commercial banks
Whether the devaluation of the country’s currency (cedi) would improve the trade balance? One
would say that the price elasticises of the export demand and import demand equations in the long
run are consistent with the theoretical predictions of utility maximisation. However, the
elasticities of exports and imports relative to the real exchange rate in the short-run are very
small suggesting supply- and demand-side rigidities in export and import demand flows of Ghana.
Any nominal devaluation of the cedi is bound to weaken the trade balance at least in the short-to-
medium term.
Ghana has no choice therefore, other than to adhere to the fundamentals of the foreign exchange
rate market to solve its perennial problems of deficit, by applying prudent fiscal and monetary
policies and exchange rate policies based on purchasing power parity. These policy rules will also
improve the confidence of consumers and investors in the economy and improve Ghana’s
competitiveness in the global market.
Globalisation practices
Firstly, the IMF and World Bank seem to have great influence over government trade policy. Even
though the adverse effects of imports on farmers are increasingly evident, these institutions have not
wavered in their policy insistence that the applied tariffs remain at their low level.
Secondly the imports of products coming from European countries or the USA were and are
significantly subsidized. The subsidies have enabled the farms and companies in these
developed countries to export at prices that are artificially low.
Ghana is hence a victim of unfair market conditions: it faces competition from subsidized
products from rich countries, it is legally able to protect itself from such unfair competition
by raising its tariffs, but it is disallowed from doing so by powerful international financial
institutions on which the country depends on loans.

3. References:
http://www.ghanaweb.com/GhanaHomePage/NewsArchive/artikel.php?ID=317174