Economist Professor Godfred Bokpin is warning that the full benefits of the recent trade surpluses that Ghana has been recording, will not be enjoyed if the local content contribution to Ghana’s export figures is not improved.
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According to Professor Bokpin, Ghana’s exports are currently dominated by the activity of foreign firms, especially in areas like oil and gas, which means that earnings from such exports are likely to be shipped outside.
The latest Summary of Macroeconomic and Financial Data from the Bank of Ghana, shows that total exports from Ghana as at April this year was USD 5.39 billion as against imports of USD 4.1 billion. This brings Ghana’s trade surplus to USD 1.28 billion as of April this year.
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A closer look at the numbers shows that Gold exports amounted to USD 1.95 billion of the total export figure at the end of the fourth month, while Cocoa exports amounted to USD 1.03 billion. Oil exports, on the other hand, amounted to USD 1.45 billion. Key contributors to total imports as at the end of April this year were Oil and non-oil items. Total Oil imports amounted to USD 778.3 million while non-oil imports were worth USD 3.32 billion.
Speaking to Citi Business News about the positive trade surplus, Professor Bokpin urged the government to find ways of slowing down the level of outflows of earnings from exports to help stabilize the local currency.
“We should be concerned about the other components of the balance of payment statistics. So, for instance when you reconcile the trade balance which is positive against the services and income account which is also a part component of the balance of payment statistics, you will see that we are recording huge outflows when it comes to the services and income accounts, far more than we are recording in terms of positive balance from trade surplus.
And that is why at the end of the day you see that we are recording trade surplus and yet the Cedi continues to depreciate. Thus, the bulk of this export earnings actually don’t end up being repatriated to this country and is not reflected completely in our international reserves which will offer sufficient cushion for the stability of the cedi.”
A careful analysis of the trade figures also shows that total export figures for the first four months of 2019 were lower than the export figures recorded in the first 4 months of 2018. While acknowledging that the difference was marginal, Professor Bokpin added that it is important for the government to continue changing the structure of the economy with a special emphasis on implementing the many initiatives geared at industrialization.
“So going forward I think that we have to look at the structure of the economy, the local content in the economy and then make sure that while we are recording greater heights in terms of exports, we are also increasing the local content which enables us to retain a substantial portion of those export earnings.
What we should be doing is to also increase the non-oil real sector activities to ensure that we are exporting more from non-traditional exports, where Ghanaians are playing a key role. And that is where government’s industrialization drive which is commendable though, has to be sustained, has to be fast-tracked to ensure that we are able to diversify the export base and increase local content in that sector.”
Mr. Bokpin surmised that a focus on the country’s non-traditional exports will be prudent as areas such as the extractive sector have been overrun by foreigners.
“When it comes to the oil sector we have lost control. It’s predominantly dominated by foreign players, and that in itself is not helping in terms of repatriation of the export earnings which should boost our international reserves and ensure that there is greater stability for the cedi,” he said.