Ghana, like many other developing countries, relies heavily on imports of food and consumer goods to feed its population.For example, imported goods from Ghana 55% of rice that is consumed locally. The country’s dependence on imports is primarily a result of the production of low-value primary products with no substantial added value.
To prevent over-reliance on foreign products, the government proposed the following: trade restrictive policy Through legislative means on 22 key points. It justified this policy on the grounds that it wanted to reduce Ghana’s dependence on foreign products by making locally produced products more attractive from a price point of view. The idea is that this will increase domestic production.
The list of items includes essential foods such as rice, offal, chicken, cooking oil, fruit juice, noodles, pasta, fish, sugar, and canned tomatoes. All are commonly consumed in most households in Ghana.
However, imposing restrictions on these food items has the potential to increase food prices, as discussed below. my recent paper, raising concerns about potential threats to food security. Restricting imports without ensuring high-quality, competitive domestic products will not lead to consumer preference for locally produced products. What Ghana’s industry needs is less production constraints and more incentives to compete domestically.
Read more: Ghana wants to restrict imports of 22 products β economists explain how, why and what else must be done
opposition to musical instruments
The proposal faced opposition from various quarters, including civil society. organization, Industry group And that a few in parliament.
Opponents of the proposed policy argued that its restrictive nature would have serious implications for Ghana’s economy and food security. They argued that domestic producers may struggle to meet local demand for certain items that the government aims to limit. for example, 90% of Ghana’s total poultry consumption is dependent on imports.
As a result, the government Paused Mechanism proposed in December 2023 for wider consultation.
reason
The ministry wanted this restriction for two main reasons.
First, to suppress it, Fall of the Ghanaian Cedi. A surge in imports of the products in question increased demand for the US dollar, putting pressure on the local currency. In 2022, Ghana imported food and related goods worth $1. Estimated USD 2.6 billion.
Second, the objectives were: Promote industrialization in Ghana. The ministry said the import restrictions were a strategy to reduce competition for local producers, encourage increased local production and reduce Ghana’s dependence on foreign countries to meet domestic demand.
However, there are many concerns about the potential impact of the proposed restrictions. These include food security, government revenues, trade distortions, and business costs.
Read more: Ghana’s return to the IMF within three years highlights serious economic problems
Possible impact
Food insecurity: data from food and agriculture organization It shows that 21 million people were severely food insecure in 2021. Restrictions on imports of commonly consumed food items will create food shortages, increase food prices, and further reduce food security.
Producers may profit by selling at a higher price, but consumers do not.
Revenue loss: In particular, there is the potential for loss of revenue due to customs duties and import duties. Many developing countries, including Ghana, rely heavily on import duties for government revenue.recent statistics World Bank World Development Indicators Statistics for 2020 show that customs duties and import taxes account for 12.4% of Ghana’s tax revenue.
Trade rules: Ghana is a member of the World Trade Organization (WTO), which expects countries to align their trade policies with relevant globally agreed provisions and rules. .
WTO I allow it Member countries set import conditions for specific products. This is known as an import license. However, the WTO stipulates that import licenses must not distort or impede trade.
Ghana could face retaliation from other countries if the restrictions harm its interests.
Obtain an import permit.this is Administrative procedures Requiring the submission of applications or other documents (other than those required for customs purposes) to the relevant administrative authorities as a pre-condition to the importation of goods. This is permissible under WTO rules. However, challenges arise in its implementation, especially in the allocation of quotas. Successful implementation requires close consultation with importers and importing countries.
Initial opposition within Ghana suggests a lack of serious consultation by the government.
Import permits could introduce rent-seeking activities in countries like Ghana. Establishing a board to license importers opens the door to bribery and corruption.Transparency International and the World Bank rank Ghana has a higher corruption index than other developing countries.
for example, World Bank Corporate Survey This indicates that a high proportion of Ghanaian businesses are expected to pay bribes to obtain licenses, government contracts and operating permits. When companies rely on bribery, it creates inefficiencies and increases the cost of doing business.
Answer
Curbing imports without alternative domestic production and supply mechanisms is economically unsound. Policies are needed to promote industrialization and position Ghana as a net exporter.
That’s not happening. In his recently presented 2024 budget, Growth rate is -2.2% For industrial use.
To promote industrialization, the government will reduce production constraints such as power shortages, capital shortages, and high costs of agricultural products, and provide incentives that will give Ghanaian producers a competitive advantage in the domestic market. The emphasis should be on Closing borders to international trade or restricting imports is inconsistent with the objective of promoting industrialization. That’s not a sustainable approach.