Dr Frank Bannor, the spokesperson for the New Patriotic Party’s Finance and Economy Committee, has raised a sharp challenge to the government’s economic approach, pointing to a contradiction between efforts to stabilise the cedi and the push for import substitution. His question is simple but direct: how can the government expect local producers to compete when it supports a stronger cedi that makes imports cheaper?
The government, led by Finance Minister Dr Cassiel Ato Forson, has made import substitution a focus under its 24-Hour Economy policy. The goal is to boost domestic production of goods currently imported, cut the import bill, and reduce demand for foreign exchange. At the same time, the 2025 Budget outlines measures to support cedi stability, including foreign exchange interventions by the Bank of Ghana and FX forward auctions.
Dr Bannor says these policies pull in opposite directions. A stronger cedi lowers the domestic-currency cost of imports. This makes imported goods cheaper and more competitive compared to local products. He put it plainly: “You are facilitating the taste for imported products and yet, you say you want to increase local production of products. For who to buy when imported substitutes are cheaper?”
The economist argues that exchange-rate policy cannot be separated from industrial policy. If local manufacturers face high production costs while imports become cheaper because of cedi support, domestic producers risk being squeezed out. That runs counter to the government’s stated ambition to encourage import substitution.
Dr Forson, however, presents exchange-rate stability as part of a broader plan to reduce inflation, stabilise the economy, and create conditions for increased domestic production. The government believes that import substitution will eventually reduce demand for foreign exchange by replacing imported goods with local alternatives.
This sets up a fundamental question for policymakers: can Ghana simultaneously pursue a stronger, stable cedi, cheaper imports, and aggressive import substitution without creating conflicting incentives? Dr Bannor challenges the government to explain how these policies fit together.
“What sort of economics are we practising in Ghana now?” he asked, pressing the Finance Minister to clarify how the government plans to protect and expand local production while maintaining policies that can make imported goods more affordable.
The tension highlights the balancing act governments face when trying to manage currency stability and industrial growth at the same time. Ghana’s approach so far involves using foreign exchange tools to keep the cedi stable while promoting local production to reduce import reliance. But Dr Bannor’s critique suggests that this strategy may undermine local producers by making imports artificially cheaper.
The debate is not new. Economists warn that a strong currency can hurt manufacturing by encouraging imports, especially when local industries struggle with high costs. The government’s counterargument is that exchange-rate stability will help lower inflation and improve the business environment, which should, in theory, support domestic producers.
For now, the question remains open. Ghana’s policymakers will need to clearly define how they reconcile these conflicting goals if they want to see import substitution succeed alongside cedi stability. Dr Bannor’s remarks call for a frank conversation about the trade-offs involved and the economic logic guiding the government’s strategy.
According to 3News.
