There had been times when Ghana’s import cover was only meant for two weeks making it dangerous for the country to economically survive beyond two weeks since there would be no reserves for the country to bring in imported items that it needed so much to satisfy the needs of its people.
Economic performance is, therefore, not easy because as far as some countries have import cover for about six months or one year, others may have import covers that would last for days. Many developing countries have had problems with import cover since they are not able to generate enough international reserves to cover imports of essential goods over a long period.
DEPENDABLE IMPORT COVER
It is not easy for every country to get a dependable import cover to give an assurance that the economy of that country is stable, formidable and performing well compared with others. Stability can only be possible when, during difficulties, efforts are made by the planners of the economy to work hard towards generating more incomes through exports while at the same time importing less from other countries.
The COVID-19 pandemic has not been kind to all countries, especially the developing ones, and the economies of all these countries have been thrown out of gear, making them import more compared with the volume of exports. This is an unfavourable situation that should be avoided, if possible, but in practical terms, it is not easy to do so especially when countries are faced with unavoidable practical challenges as has been imposed by the pandemic.
It is important to note that there are so many ways a country’s economy can be assessed whether it is enjoying a trend that is depicting an upward growth or otherwise. If a country is enjoying increasing economic growth, it will show in the way it is able to establish its imports cover to the world.
TREND OF GROWTH
If a country enjoys a trend of upward growth, it means that the different sectors of the economy together contribute massively, in average terms, to general economic growth and welfare. On the other hand, if the trend of growth shows a decline, it means that there is a deterioration of growth in the economy and this will adversely affect the economic well-being of the people.
We may also look at how an economy is in terms of its import cover which indicates to us whether a country has enough reserves to allow it to stay for a long time if it is unable to produce certain goods and services for itself. This is what makes import cover important.
Whenever we speak of an import cover, we are simply referring to the number of months that could be covered for by a country’s international reserves. A country’s international reserves refer to the amount of money available to that country to import goods and services which it is not able to produce for itself.
INTER-DEPENDENCE
Different countries in the world inter depend on one another in the sense that what one country can produce for itself cannot be produced in the same way by another country. For this reason, each country makes available to other countries what it can produce and, therefore, export these commodities or items to those countries that may need such goods but cannot produce by themselves.
It is important that as countries transact business with one another, they can accumulate enough income reserves over a period so that in times of need they will be able to withstand a period of the necessity of imports of essential goods.
As a country transacts business in form of trade with other countries, it derives earnings from different sources that is why the incomes earned and kept for a period are referred to as international reserves.
INTERNATIONAL RESERVES AND IMPORT COVER
These international reserves determine the import cover that the country concerned can enjoy. A country that has sizeable international reserves to cover many months such as 18 or 20 months is said to be more stable and better than another country that has an import cover for only two or three months.
The COVID-19 pandemic has impacted negatively on various economies in the world such that the import cover of various countries has been reduced. This is easy to understand, seeing that many economies have been thrown out of gear.
A country that has an import cover of only three weeks stands the danger of falling into economic turmoil when there is a disaster that will last for more than three weeks. For this reason, every country needs to work hard and accumulate more international reserves so that the economy will be seen as reliable, dependable and stable.
IMPORTANCE OF IMPORT COVER
An import cover is an important indicator of the stability of a country. If this is so, then we need to work hard in spite of the challenges we face to bring in more earnings from all directions, in terms of, reserves to cover longer periods so that the economy can be seen as reliable, dependable and stable even in the face of the COVID-19 pandemic
The good news for all Ghanaians is that Ghana’s gross international reserves position grew strongly to US$11.02 billion in the first half of this year. This is equivalent to five months of import cover. The reserves were, however, a little below the US$11.30 billion recorded in May 2021, but stronger than the US$10.9 billion registered in April 2021.
COUNTRY’S RESERVE POSITION
In January, February and March this year, the country’s reserve position was US$8.83 billion, US$8.7 billion, and US$8.3 billion respectively. Despite the economic challenges posed by the COVID-19 pandemic, the economy has been able to withstand pressures and come out with an import cover for at least five months. We would not conclude that we have done better and, therefore, need to rely on our oars.
However, this is good performance in these days when the pandemic is causing havoc to all economies including those of the USA, Germany, Switzerland, Canada etc. The managers of the economy under the leadership of President Akufo-Addo must continue to work hard so that we will see further improvement in our economic situation.
COVID-19 PANDEMIC
In conclusion, people in Ghana ought to note that during the pandemic, which is causing havoc to nations across the world, we need to appreciate the effort being made by government to overcome all the economic challenges facing the nation but not to behave as if nothing is being done by the leadership of the country. This approach is negative and irresponsible and should not be entertained by anyone who means well for the country, especially when we know that the wolf criers in this country cannot perform as creditably as we see today.
By Dr Kofi Amponsah-Bediako
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