The media made the Deputy Minister of Trade and Industry, Murtala Mohammed’s revelation of Ghana’s trade deficit of $4 billion look so frightening to the ordinary Ghanaian. There is a common perception in the media and in the general public that trade deficits are bad news but it is not always true.
Murtala Mohammed said Ghana spent $17 billion in import and got $13 billion on export so there was a balance of payment of $4 billion. He added that due to the trade deficit government is determined to promote made in Ghana goods.
A trade deficit is an economic condition that occurs when a country imports more goods than it is exporting. In press discussion of trade balances, it is almost a given that surpluses are good and deficits bad. But we can agree that the trade deficit is not a problem in itself, but is a symptom of a problem. The UK who promotes their goods and services even incurred a trade deficit of £34.8bn in 2014.
Ghana’s trade deficit will represent a much bigger threat to our long-term domestic tranquility than the budget deficit, which is the national debt the government is incurring by spending more than it makes. The national debt is certainly a problem, but nowhere near as big a concern as the trade deficit to those who understand the implications of global economics.
Many developing countries, like Ghana, are dependent on commodities coming from abroad. Ghana is not yet out of the woods given that she still imports more than what is exported. Further increase in investment and infrastructure here in Ghana, where we are struggling to export increases import, and those two things together makes the trade deficit large.
Modern civilization has made it highly impossible for a country to live in isolation. It is such that, each country will need to depend on the other for imports and exports. It is so easy for one to call for government to bridge the gap between imports and exports but it is practically difficult to do so.
Reducing Ghana’s trade deficit cannot be solely zoomed on the promotion of made in Ghana goods. Government’s importation of oil is constant factor which is also largely influenced by prices and increase in energy demand hence, a direct effect on trade deficit.
Ghana, invests so much to keep the lights on. Millions of dollars needs to be spent on importation of oil against our low domestic production. To make Ghana run, we need to buy more oil and it is after doing so that when we can turn on a light switch and get in our cars for work.
If Ghana is to solely depend on domestic oil, including crude and gas production, government could cut down on oil importation, and this could even lower the $4 billion trade deficit.
The Head of Corporate Communications Unit of VRA, Samuel Fletcher, in a Public Hearing on the Public Utilities Regulatory Commission (PURC) at Koforidua in 2013, revealed that Ghana spends as much as 60 million dollars before acquiring 400 thousand barrels of crude oil for the supply of power through the Thermal plant for every 20 days.
Trade deficit is directly, and powerfully, influenced by the current price of crude oil and other petroleum products. To make it as plain as possible: The trade deficit is a problem of petroleum and cars. Government spending on oil is not a tiny drop in the bucket when you look at trade figures.
The thing is all over the world, the energy companies do not want anyone to realize monies spent on oil are literally larger. The energy groups are more powerful, and richer than all but a handful of the governments on Earth. They are able to make governments believe energy independence is impossible.
Products like imported steel, medicine, clothes and outsourcing of services, in many ways, are dwarfed by the entrenched trade deficit caused by the addiction to oil. Special interest groups make a point to blame all of our woes on cheap imported goods from China and medicines from India etc but we cannot do away with oil.
As oil is a necessity for every nation, it is also one key factor that helps to swell up trade deficit. Until Ghana gets to produce enough oil including crude and gas for domestic use and export to reduce trade deficit, it should not be a bad news .But the only reason Ghana’s trade deficit will continue to be a bad news is that so many people believe it is bad news!