Ghana's External Sector: Strategies and Outlook
ECON 215
Introduction to Economy of
Ghana
Session 5 – External Sector Part 2
Lecturer: Dr. Emmanuel A. Codjoe
& Dr. Michael Danquah
Contact Information: ecodjoe.ug@gmail.com
Session Overview
•
Session Overview: This session considers Ghana’s external
sector in detail and discuss the medium term strategies for
Ghana’s external sector.
Goals/ Objectives: At the end of the session, the student will
•
Understand the importance of Ghana’s external sector
•
Know the direction of Ghana’s trade
•
Be aware of strategies which have been put in place to
enhance the development of Ghana’s external sector.
Slide 2
Session Outline
The key topics to be covered in the session are as follows:
•
Topic One: Ghana’s External Sector
•
Topic Two: Ghana’s Balance of Payments
•
Topic Three: Outlook For the External Sector
Slide 3
Reading List
•
Refer students to relevant text/chapter or reading materials
you will make available on Sakai
Slide 4
GHANA’S EXTERNAL SECTOR
Topic One
Slide 5
Importance of External Sector
•
Like all countries Ghana trades with the rest of the world
because of the benefits derived from trade. These benefits
include the following:
a.
It enables Ghana to access goods and services not available
locally.
b.
Ghana is able to sell goods and services that it has in relative
abundance.
c.
Ghana is able to attract foreign expertise and capital to develop
her economy.
d.
Trade increases competition which forces firms to be more
efficient and offer more benefits to consumers.
e.
Because of the need to produce for export, Ghana is able to
take advantage of benefits derived from large-scale production
i.e. economies of scale.
Slide 6
Direction of Ghana’s Trade
•
Destination of Exports
During the review period, the European Union received the largest share of
Ghana’s total exports (29.1%). The other recipients were the Far East
(26.5%), Other European countries (13.3%), Other Economies (9.9%), the
Rest of Africa (9.5%), ECOWAS (8.6%), and North America (3.0%).
India was the single largest destination of Ghana’s exports in the first quarter
of 2015, representing about 12.4 per cent. The main export to India was
gold.
Other important markets for Ghanaian exports included: Switzerland (10.9%),
Netherlands (8.7%), South Africa (8.6%), United Arab Emirates (8.0%),
China (7.0%), Italy (6.6%), Malaysia (3.3%), Portugal (3.2%) and USA
(2.8%).
Slide 7
Direction of Ghana’s Trade Cont’d
•
Origin of Imports
In terms of geographical distribution, the Far East was the
leading source of imports accounting for 30.6 per cent of the
total non-oil imports. The European Union followed with a
share of 27.5 per cent, North America (12.6%), Other (11.1%),
ECOWAS (7.8%), Rest of Africa (5.5%) and Other Europe
(4.9%).
China was the leading source of Ghana’s imports with a share of
15.3 per cent. Other major sources of imports were United
States (9.7%), Netherlands (6.5%), Belgium (4.8%), India
(4.0%), South Africa (3.3%), Cote d’Ivoire (3.2%), Canada
(2.8%), Malta (2.8%) and United Kingdom (2.7%).
Slide 8
Slide 9
Top Ten Major Non-Oil Imports
Slide 10
Top Ten Major Non-Traditional Export
Items
GHANA’S BALANCE OF PAYMENTS
Topic Two
Slide 11
Snapshot of Ghana’s Balance of
Payments (BoP)
•
External Sector Developments
The overall balance of payments improved significantly to a deficit
of US$85.2 million in 2014 from a deficit of US$874.2 million in
2013. The outturn in 2014 was the result of an improvement in
the current account which outweighed the deterioration in the
capital and financial account.
•
Current Account
The current account balance improved to a deficit of US$3,698.2
million (9.2% of GDP) from a deficit of US$5,704.1 million (11.9%
of GDP) in 2013. This development was the net result of
significant reduction in the trade deficit, improvement in the
current transfers account and worsening of the services and
investment income accounts.
Slide 12
Slide 13
Snapshot of Ghana’s Balance of
Payments (BoP) Cont’d
•
Trade Balance
The trade balance recorded a lower deficit of US$1,386.9 million
compared with a deficit of US$3,848.3 million in 2013. This was the
net result of a sharp slowdown in imports and a moderate
reduction in export revenues in 2014.
•
Merchandise Exports
The value of merchandise exports for the review year was estimated at
US$13,213.1 million, indicating a decrease of 3.9 per cent from the
outturn of 2013. Higher receipts from the export of timber, cocoa
beans and cocoa products were not enough to offset the reductions
in receipts from gold, crude oil and other non-traditional exports.
Falling commodity prices on the international market for gold and
oil mainly accounted for the decline in earnings.
Slide 14
Snapshot of Ghana’s Balance of
Payments (BoP) Cont’d
•
Merchandise Imports
The value of merchandise imports for 2014 was estimated at
US$14,600.1 million, down by 17 per cent from the outturn in 2013.
The decline in imports was the result of a significant reduction in
non-oil imports underpinned by the sharp depreciation of the
domestic currency in the review year. However, imports of crude oil
and refined oil products
increased marginally.
•
Oil Imports
The value of oil imports (including gas) rose by 4 per cent to
US$3,694.0 million in 2014, driven by increased imports
of finished
oil products.
Slide 15
Snapshot of Ghana’s Balance of
Payments (BoP) Cont’d
•
Non-Oil Imports
Total expenditure on non-oil imports in 2014 declined by 22.4 per cent to
US$10,906.1 million. The decrease was reflected in all categories of
imports, namely capital,
intermediate and consumption goods.
•
Services, Income and Current Transfers
The services, income and transfers account recorded a deficit of US$2,311.3
million, compared with a deficit of US$1,855.7 million in 2013. There were
increases in the net outflows in the services and income accounts in the
review year. However, there was an improvement in the net inflow in the
net current (official and private) transfers account. The Services and
Income accounts registered net outflows of US$2,602.3 million and
US$1,717.4 million respectively. The current transfers (net) registered an
increase of 3.6 percent to US$2,008.5 million. This development was the
net result of a 7.5 per cent increase in private remittances (net) to
US$1,998.9 million and 88 per cent decline in official transfers to US$9.6
million in the review year.
Slide 16
Snapshot of Ghana’s Balance of
Payments (BoP) Cont’d
•
Capital and Financial Account
The capital and financial account registered a net inflow of US$3,752.8
million, representing a decline of 30.1 per cent from the outturn in 2013.
The capital account did not record
any inflow in 2014.
•
Financial Account
Transactions in the financial account resulted in a net inflow of US$3,752.8
million compared with US$5,018.9 million registered in 2013. The year
witnessed increases of US$130.7 million in foreign direct investment and
US$177.0 million in net portfolio investments to US$3,357.0 million
and
US$835.9 million respectively.
Official capital inflows however registered a
decrease of US$508.0 million to US$941.0 million. This was the net result
of decreases of US$388.1 million and US$120.0 million in loans and
amortization respectively, and an increase of US$235.6 million in
Government oil investments.
Slide 17
Snapshot of Ghana’s Balance of
Payments (BoP) Cont’d
•
International Reserves
The stock of net international reserves (NIR)declined by
US$85.2 million to US$3,199.3million at the end of 2014.
•
Gross international reserves recorded a draw down of
US$171.14 million to US$5,461.0 million at the end of
2014, sufficient to provide cover for 3.2 months imports
of goods and services compared with 3.1 months in 2013
Slide 18
OUTLOOK FOR THE EXTERNAL
SECTOR
Topic Three
Slide 19
Medium Term External Sector Policies
•
The medium-term objective of the external sector policy under this
policy framework (i.e. the Ghana Shared Growth and Development
Agenda II (GSGDA II) is to review and intensify the efforts at improving
Ghana’s export competitiveness; diversifying and increasing exports
and markets; accelerating economic integration with other regional
and/or sub-regional states; as well as building gross international
reserves adequate to cushion the economy against external shocks.
•
Accordingly, the efforts to substantially increase merchandise exports
and reverse the persistently high trade deficits will be accelerated,
whilst implementing a long-term strategy to progressively increase
Ghana’s gross international reserve to at least six months of imports
cover, consistent with the requirements of the West Africa Monetary
Zone
(WAMZ) convergence criterion.
Slide 20
Medium Term External Sector
Strategies
•
Improve Trade Competitiveness:
To improve trade
competitiveness and increase exports, the
strategies to be
implemented include: ensuring competitive real exchange rates
that support the export sector; improving the supply side
capacity of import/export policy regime; and strengthening the
links between industrial and trade policies.
•
Diversify and Increase Exports:
The strategies to be
implemented to ensure diversification and increase in Ghana’s
exports include: promoting the production of non-traditional
export products; taking full advantage of Preferential Access to
markets; strengthening participation of Ghana in Multilateral
Trade negotiations; and ensuring effective implementation of the
ETLS
with member countries.
Slide 21
Medium Term External Sector
Strategies Cont’d
•
Accelerate economic integration with other regional and sub-
regional blocks and markets:
To take advantage of the significant
economic opportunities that exist in the West Africa sub-region and
other regional blocks for accelerated development of the country,
the following strategies will be implemented:
i.
accelerate the implementation of the WAMZ programme;
ii.
implement the ECOWAS Community Development Programme;
iii.
ensure that National Trade Policy reflects ECOWAS protocols; and
iv.
strengthen trade relations with other regional blocks
and
markets.
Slide 22
Medium Term External Sector
Strategies Cont’d
•
Expanding Access to Domestic and International Markets:
i.
Government will implement the National Export Strategy,
particularly, the diversification of export commodities and
markets;
ii.
complete the implementation of the National Trade Policy;
apply World Trade Organization (WTO) arrangements and
explore other bilateral and multilateral protocols for the
promotion of domestic industries; and
iii.
intensify business
outsourcing and sub-contracting.
References
Slide 24
This session led by Dr. Emmanuel A. Codjoe and Dr. Michael Danquah delves into Ghana's external sector, discussing its importance, trade direction, and strategies for development. Students will gain insights into Ghana's trade dynamics, balance of payments, and future outlook. The session covers key topics like Ghana's trade partners, exports destinations, and the benefits of international trade. Reading materials will be provided through Sakai to supplement learning.
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Presentation Transcript
Lecturer: Dr. Emmanuel A. Codjoe & Dr. Michael Danquah Contact Information: ecodjoe.ug@gmail.com College of Education School of Continuing and Distance Education 2014/2015 2016/2017
Session Overview Session Overview: This session considers Ghana s external sector in detail and discuss the medium term strategies for Ghana s external sector. Goals/ Objectives: At the end of the session, the student will Understand the importance of Ghana s external sector Know the direction of Ghana s trade Be aware of strategies which have been put in place to enhance the development of Ghana s external sector. Slide 2
Session Outline The key topics to be covered in the session are as follows: Topic One: Ghana s External Sector Topic Two: Ghana s Balance of Payments Topic Three: Outlook For the External Sector Slide 3
Reading List Refer students to relevant text/chapter or reading materials you will make available on Sakai Slide 4
Topic One GHANA S EXTERNAL SECTOR Slide 5
Importance of External Sector Like all countries Ghana trades with the rest of the world because of the benefits derived from trade. These benefits include the following: a. It enables Ghana to access goods and services not available locally. b. Ghana is able to sell goods and services that it has in relative abundance. c. Ghana is able to attract foreign expertise and capital to develop her economy. d. Trade increases competition which forces firms to be more efficient and offer more benefits to consumers. e. Because of the need to produce for export, Ghana is able to take advantage of benefits derived from large-scale production i.e. economies of scale. Slide 6
Direction of Ghanas Trade During the review period, the European Union received the largest share of Ghana s total exports (29.1%). The other recipients were the Far East (26.5%), Other European countries (13.3%), Other Economies (9.9%), the Rest of Africa (9.5%), ECOWAS (8.6%), and North America (3.0%). Destination of Exports India was the single largest destination of Ghana s exports in the first quarter of 2015, representing about 12.4 per cent. The main export to India was gold. Other important markets for Ghanaian exports included: Switzerland (10.9%), Netherlands (8.7%), South Africa (8.6%), United Arab Emirates (8.0%), China (7.0%), Italy (6.6%), Malaysia (3.3%), Portugal (3.2%) and USA (2.8%). Slide 7
Direction of Ghanas Trade Contd Origin of Imports In terms of geographical distribution, the Far East was the leading source of imports accounting for 30.6 per cent of the total non-oil imports. The European Union followed with a share of 27.5 per cent, North America (12.6%), Other (11.1%), ECOWAS (7.8%), Rest of Africa (5.5%) and Other Europe (4.9%). China was the leading source of Ghana s imports with a share of 15.3 per cent. Other major sources of imports were United States (9.7%), Netherlands (6.5%), Belgium (4.8%), India (4.0%), South Africa (3.3%), Cote d Ivoire (3.2%), Canada (2.8%), Malta (2.8%) and United Kingdom (2.7%). Slide 8
Top Ten Major Non-Oil Imports Jan - Mar 2014 Jan - Mar 2015 Description US$ M (fob) 115.57 78.99 36.57 137.45 57.01 42.16 38.28 276.43 128.19 61.11 52.68 34.46 200.50 200.50 % Distr. Description US$ M (fob) 144.26 88.79 55.47 259.49 118.89 76.31 64.29 270.48 82.63 67.16 60.91 59.78 133.81 133.81 % Distr. 17.9 11.0 6.9 32.1 14.7 9.4 8.0 33.5 10.2 8.3 7.5 7.4 16.6 16.6 Capital Motor vehicles for the transport of goods, n.e.s. Machines for the reception,conversion and transmission of etc Consumption Frozen Fish Rice Sugar Intermediate Palm oil and its fractions Cement clinkers Wheat and meslin Polyethylene Other Motor vehicles for the transport of persons 15.8 10.8 5.0 18.8 7.8 5.8 5.2 37.9 17.6 8.4 7.2 4.7 27.5 27.5 Capital Floating or submersible drilling or production platforms Motor vehicles for the transport of goods Consumption Rice Insecticides, herbicides and fungicides Frozen fish Intermediate Semi-manufactured gold Cement and clinker Palm oil and its fractions Wheat and meslin Other Motor vehicles for the transport of persons Grand Total Grand Total 729.94 100.0 808.04 100.0 Slide 9
Top Ten Major Non-Traditional Export Items Jan - Mar 2014 Jan - Mar 2015 Description US$ M % Distr. Description US$ M % Distr. Palm kernel or babassu oil (excl. crude) fractions 34.72 17.6 Palm oil and its fractions 36.19 15.9 Prepared or preserved tuna, skipjack and atlantic bonito 31.83 16.1 Prepared or preserved tuna 35.88 15.8 Palm oil and its fractions 27.61 14.0 Cashew nuts 35.04 15.4 Cashew nuts 17.92 9.1 Pebbles, gravels, broken or crushed stone etc for road 20.71 9.1 17.15 8.7 Shea (karite) oil and fractions 19.60 8.6 Tableware, kitchenware, other household articles and toilet articles Sesamum seeds 16.76 8.5 Plywood and veneered panels 18.90 8.3 Superphosphates 15.20 7.7 Aluminium 16.66 7.3 Aluminium, unwrought, not alloyed 14.31 7.3 Tableware, kitchenware, other household articles 15.51 6.8 Technically specified natural rubber 11.60 5.9 Medium oils, kerosine type jet fuel 14.38 6.3 Fruit, fresh - other, nes 10.09 5.1 Sesamum seeds 14.13 6.2 197.19 100.0 227.02 100.0 Slide 10
Topic Two GHANA S BALANCE OF PAYMENTS Slide 11
Snapshot of Ghanas Balance of Payments (BoP) External Sector Developments The overall balance of payments improved significantly to a deficit of US$85.2 million in 2014 from a deficit of US$874.2 million in 2013. The outturn in 2014 was the result of an improvement in the current account which outweighed the deterioration in the capital and financial account. Current Account The current account balance improved to a deficit of US$3,698.2 million (9.2% of GDP) from a deficit of US$5,704.1 million (11.9% of GDP) in 2013. This development was the net result of significant reduction in the trade deficit, improvement in the current transfers account and worsening of the services and investment income accounts. Slide 12
Snapshot of Ghanas Balance of Payments (BoP) Cont d Trade Balance The trade balance recorded a lower deficit of US$1,386.9 million compared with a deficit of US$3,848.3 million in 2013. This was the net result of a sharp slowdown in imports and a moderate reduction in export revenues in 2014. Merchandise Exports The value of merchandise exports for the review year was estimated at US$13,213.1 million, indicating a decrease of 3.9 per cent from the outturn of 2013. Higher receipts from the export of timber, cocoa beans and cocoa products were not enough to offset the reductions in receipts from gold, crude oil and other non-traditional exports. Falling commodity prices on the international market for gold and oil mainly accounted for the decline in earnings. Slide 14
Snapshot of Ghanas Balance of Payments (BoP) Cont d Merchandise Imports The value of merchandise imports for 2014 was estimated at US$14,600.1 million, down by 17 per cent from the outturn in 2013. The decline in imports was the result of a significant reduction in non-oil imports underpinned by the sharp depreciation of the domestic currency in the review year. However, imports of crude oil and refined oil products increased marginally. Oil Imports The value of oil imports (including gas) rose by 4 per cent to US$3,694.0 million in 2014, driven by increased imports of finished oil products. Slide 15
Snapshot of Ghanas Balance of Payments (BoP) Cont d Total expenditure on non-oil imports in 2014 declined by 22.4 per cent to US$10,906.1 million. The decrease was reflected in all categories of imports, namely capital, intermediate and consumption goods. Non-Oil Imports The services, income and transfers account recorded a deficit of US$2,311.3 million, compared with a deficit of US$1,855.7 million in 2013. There were increases in the net outflows in the services and income accounts in the review year. However, there was an improvement in the net inflow in the net current (official and private) transfers account. The Services and Income accounts registered net outflows of US$2,602.3 million and US$1,717.4 million respectively. The current transfers (net) registered an increase of 3.6 percent to US$2,008.5 million. This development was the net result of a 7.5 per cent increase in private remittances (net) to US$1,998.9 million and 88 per cent decline in official transfers to US$9.6 million in the review year. Services, Income and Current Transfers Slide 16
Snapshot of Ghanas Balance of Payments (BoP) Cont d The capital and financial account registered a net inflow of US$3,752.8 million, representing a decline of 30.1 per cent from the outturn in 2013. The capital account did not record any inflow in 2014. Capital and Financial Account Transactions in the financial account resulted in a net inflow of US$3,752.8 million compared with US$5,018.9 million registered in 2013. The year witnessed increases of US$130.7 million in foreign direct investment and US$177.0 million in net portfolio investments to US$3,357.0 million and US$835.9 million respectively. Official capital inflows however registered a decrease of US$508.0 million to US$941.0 million. This was the net result of decreases of US$388.1 million and US$120.0 million in loans and amortization respectively, and an increase of US$235.6 million in Government oil investments. Financial Account Slide 17
Snapshot of Ghanas Balance of Payments (BoP) Cont d International Reserves The stock of net international reserves (NIR)declined by US$85.2 million to US$3,199.3million at the end of 2014. Gross international reserves recorded a draw down of US$171.14 million to US$5,461.0 million at the end of 2014, sufficient to provide cover for 3.2 months imports of goods and services compared with 3.1 months in 2013 Slide 18
Topic Three OUTLOOK FOR THE EXTERNAL SECTOR Slide 19
Medium Term External Sector Policies The medium-term objective of the external sector policy under this policy framework (i.e. the Ghana Shared Growth and Development Agenda II (GSGDA II) is to review and intensify the efforts at improving Ghana s export competitiveness; diversifying and increasing exports and markets; accelerating economic integration with other regional and/or sub-regional states; as well as building gross international reserves adequate to cushion the economy against external shocks. Accordingly, the efforts to substantially increase merchandise exports and reverse the persistently high trade deficits will be accelerated, whilst implementing a long-term strategy to progressively increase Ghana s gross international reserve to at least six months of imports cover, consistent with the requirements of the West Africa Monetary Zone (WAMZ) convergence criterion. Slide 20
Medium Term External Sector Strategies Improve competitiveness and increase exports, thestrategies to be implemented include: ensuring competitive real exchange rates that support the export sector; improving the supply side capacity of import/export policy regime; and strengthening the links between industrial and trade policies. Trade Competitiveness: To improve trade Diversify and Increase Exports: The strategies to be implemented to ensure diversification and increase in Ghana s exports include: promoting the production of non-traditional export products; taking full advantage of Preferential Access to markets; strengthening participation of Ghana in Multilateral Trade negotiations; and ensuring effective implementation of the ETLS with member countries. Slide 21
Medium Term External Sector Strategies Cont d Accelerate economic integration with other regional and sub- regional blocks and markets: To take advantage of the significant economic opportunities that exist in the West Africa sub-region and other regional blocks for accelerated development of the country, the following strategies will be implemented: i. ii. iii. iv. accelerate the implementation of the WAMZ programme; implement the ECOWAS Community Development Programme; ensure that National Trade Policy reflects ECOWAS protocols; and strengthen trade relations with other regional blocks and markets. Slide 22
Medium Term External Sector Strategies Cont d Expanding Access to Domestic and International Markets: i. Government will implement the National Export Strategy, particularly, the diversification of export commodities and markets; ii. complete the implementation of the National Trade Policy; apply World Trade Organization (WTO) arrangements and explore other bilateral and multilateral protocols for the promotion of domestic industries; and iii. intensify business outsourcing and sub-contracting.
References Slide 24
