Trade and Industry Minister Haruna Iddrisu says government is considering an embargo on certain imports as part of measures to curb the country’s swelling trade deficit and ease pressure on the cedi, which has weakened by more than 9 percent against the dollar this year.
“We will ban the importation into the country of a number of products. I just want the institutional framework to be put in place, which is the establishment of the International Trade Commission to propose anti-dumping and countervailing measures,” said Mr. Iddrisu at a meeting with business and trade groups, including members of the Association of Ghana Industries (AGI) and Ghana Chamber of Commerce and Industry, in Accra.
“We trust that we will get your support when we move to that era”, he told the business leaders.
Ghana’s current-account deficit worsened in 2013, increasing to 12.3 percent of GDP from 12.1 percent in 2012, the Bank of Ghana (BoG) said in its monetary policy statement on Feb 6.
The trade deficit was US$3.4billion from January-October 2013.
Apart from oil and automobiles, Ghana’s largest imports include rice, frozen fish, chicken products, vegetable oil, and tomato products. Together, these items cost the nation $1billion annually to import, President John Mahama said last week.
The BoG, which stepped in early this month with short-term policies to halt the cedi’s decline, urged government to act to limit the import of consumption goods that have local substitutes and to diversify the country’s exports, currently dominated by gold, cocoa and oil.
The slump in gold and cocoa prices lost the country $1.3billion in export revenues last year, according to the central bank.
Mr. Iddrisu said government will secure a credit facility for rice farmers to boost production and curtail imports, which measure around $400million annually.
Business owners’ concerns
The meeting with the business and trade groups had been called to hear concerns about the Bank of Ghana’s (BoG) curbs on, foreign currency transactions.
In attendance was the Minister of Finance, Seth Terkper, and Deputy BoG Governor Millison Narh.
AGI exporters were unhappy about the BoG’s insistence that export earnings be repatriated to local banks within 60 days, and then converted into cedis within five days.
The exporters said their supply contracts sometimes allowed counterparties to pay after more than 60 days, and they feared the central bank’s rule will affect the nature of their dealings.
They also argued that compelling them to change their earnings into cedis within five days of receipt will cause them loses as they will have to reconvert to dollars at a higher exchange rate when they need foreign exchange in future.
Importers were worried about the central bank’s prohibition of foreign currency credit if the borrower does not earn foreign exchange, saying the directive will push them to borrow in cedis, which is costlier with interest rates of more than 25 percent per annum.
Amid the myriad complaints from the business owners, Mr. Iddrisu caused the meeting to be continued in-camera.
Subsequent to that, the BoG has amended its previous directives on the operation of foreign currency accounts.
It now says, imported balance in marginal accounts shall be held for an initial 30-day period and be renewable upon) application to their bank. The previous directive required the balance to be held for only 30 days without renewal.
The changes also allow importers to authorise direct transfers from their foreign currency accounts to pay for imports of up to US$25,000 without providing initial documentation – though the documents must be shown to the bank no later than three months after the transfer lest future transfers be disallowed.
The directive to exporters on repatriation and treatment of earnings however remains unchanged, the BoG said.