Accra, Ghana, April 4, 2019//-Ghana’s Vice-president, Dr Mahamudu Bawumia yesterday announced that government would from today April 4, 2019 reduce general import tariffs by 50 per cent while import tariffs for cars would see a 30 per cent downward revision.
Indeed, this is good news to every Ghanaian especially because it is a policy revision that promises to give the average Ghanaian some financial respite in an economy that is still recovering from a banking crisis, recently seen fuel prices go up, and its local currency fall against the dollar.
For the average Ghanaian, a 50 per cent reduction in general import duties should translate into buying goods and services at a relatively cheaper rate, or have prices remain unchanged for a longer while.
And for the importer, this is an incentive to import more.
As a country, we have always been wailing over our balance of trade which has more often than not been negative due to our huge import bill, which outstrips our exports.
This has been a major cause of the cedi’s depreciation against major trading currencies.
At a time that the cedi is still struggling to find its footing, a surge in imports as a result of the reduction of import duties could put more pressure on the local currency.
‘1 District, 1 Factory’ is seen as a good import substitution policy. However, if the reduction in import duties makes imported products cheaper, it will make local products not competitive.
If these factories are indeed ready and running, and would produce what we will need as a country for our import substitution agenda, why not disincentivise importers so that Ghanaians would have reason to consume what is produced locally?
With the 30 per cent reduction in import duties on cars, Business Finder thinks government is sending a wrong signal to investors who have expressed interest in the country’s automobile industry.
Since August 2018, three major automobile manufacturing companies – Germany’s VW, Japan’s Nissan and France’s Renault – have all expressed interest to set up assembly plants in Ghana.
Cutting imports duty on cars would adversely affect the fortunes of their investments as a larger section of the market would continue to import cheaper cars especially used ones.
It would be a good idea if government partners, for example, the Ghana Private Roads and Transport Union (GPRTU) to facilitate the importation of modern metro buses at a discounted duty rate.
This would help phase out the rickety vehicles on the streets while at the same time curb the traffic situation in the cities.
Ghana’s road network of about 40,000km has just a little of over 13,000km of trunk roads and this means majority of roads still remain in deplorable state.
Having more cars on our roads would just worsen the traffic situation, not to talk of the environmental pollution.
Even though Dr Bawumia disclosed that $1.5 billion of the $2 billion Sinohydro Bauxite Barter Transaction with China would be expended on road construction across the 16 regions, it is not enough reason to open the flood gates yet.
In all, we would have expected government to reduce these tariffs marginally and not by this much.
How would government make up for the drastic reduction in its revenues which would have otherwise been collected by the Ghana Revenue Authority (GRA)?
By Rajul Parwani
He is an economic and financial journalist based in Accra, Ghana.
