Ghana’s vulnerability as import dependent country was laid to bare by the 2022 Trade Vulnerability Report for Ghana, which disclosed that Ghana faced a trade deficit of GH¢4.5 billion in 2022 as imports soared to GH¢148.6 billion, overshadowing exports at GH¢144.1 billion.
According to the report, the nation’s trade landscape saw Europe taking the lead as the primary trade partner, accounting for 35% of exports and 39% of imports.
Notably, Switzerland led Europe as Ghana’s major trade partner, dealing in gold. The Asian giant, China, dominated the Asian trade route, while South Africa and Canada played pivotal roles in Africa and North America, respectively.
Meanwhile, the report noted that four commodities (gold bullion, crude petroleum, cocoa beans, cocoa paste) constitute about three-quarters (75.0%) of all exports. For imports, 219 different commodities make up about three-quarters (75.0%) of all imports. Moreover, four countries (Switzerland, China, Canada, and South Africa) account for over half (50.0%) of all exports.
Similarly, six countries (China, UK, Netherlands, USA, India, and Switzerland) are the source of about half (50.0%) of all imports. However, the report documented that it is only in Africa and North America that the value of exports exceeds imports.
The report found that Ghana’s key exports, gold bullion and petroleum products, combined to form 96.9 billion cedis of the total trade volume, outlining the nation’s reliance on these commodities.
Concerns Of Trade Vulnerability
However, the report highlighted concerns of trade vulnerability, emphasizing that the nation’s economy could be constrained due to these challenges including Balance of Payment Support and imported inflation.
Ghana recorded trade deficit as the imports done by the country far exceeded that of the exports done by the country in the fiscal year. The trade deficit, also termed as the negative balance of trade, arosed because Ghana does not produce almost everything. As such, it needs to import products from other countries causing a trade deficit.
Moreover, trade deficit puts pressure on the external payments and on the currency of a country, and if the trade deficit persists, then the government needs to find more foreign exchange to bridge the gap, which leads to the weakening of the local currency.
Though the World Economic Forum’s Global Future Council on Trade (GFCT) takes the view that; “trade deficits are not necessarily bad and are not a measure of whether trade policies or agreements are fair or unfair”, as a developing country, it is bad for the country. This is because when large trade deficit exists between nations, it is frequently accompanied by job losses in the local manufacturing sector.
While, forecasts for 2023 from the World Trade Organization (WTO) painted a bleak picture that may affect the balance of trade between countries in an already difficult economic climate, the WTO has downgraded its trade growth forecast from 3.4% to just 1.0% for next year. Rising inflation, energy prices and the instability caused by Russia’s invasion of Ukraine are all putting pressure on global trade.
Judging from this, Ghana could widen its trade deficit by a wider margin this year, given the dire economic situation the country currently finds itself.