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Opinions of Friday, 5 April 2019

Columnist: Dr Micheal Ayamga

Dr Micheal Ayamga writes and I concur*

Dr Mahamudu Bawumia, Vice President of Ghana Dr Mahamudu Bawumia, Vice President of Ghana

Port duties are paid in cedis not in dollars so claiming a reduction in port duties will decrease pressure on demand for dollar and strengthen the cedi is misplaced. If anything, and if the nominal decrease in import duties translate into reduction in real import tariffs then expect that appetite and ability of importers to source from outside instead of Ghana will increase. A number of things can happen.

1) import will become even cheaper so Ghanaian businesses crying cheap imports will soon be crying louder because imports just became cheaper.

2) Local companies will become less competitive and may eventually shut down - more unemployment.

3) Demand for more imports means demand for more dollars. This demand comes from increased ability of existing importers to import more due to decreased tariffs and local manufacturers turning to imports because it has become cheaper. Cedi, balance of trade and employment in trouble!

4) The argument that the decrease in tariffs will reduce smuggling is over estimated. Smugglers will smuggle even for 5% profit. There will be no effect on smuggling without measures to improve security and tighten our borders. Note that if prices of genuinely imported goods go down, expect prices of smuggled goods to go further down and effectively exterminate local production. The reduction in import duties is a gift to importers. Local producers expect cheaper electrify and petrol so WHEN WILL THEIR PAY DAY BE?

Local manufacturers expect reduction in income tax so they can be competitive against imports the government just made cheaper so WHEN WILL THIS PAY DAY BE?


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