Potential trade, welfare and revenue implications of the African Continental Free Trade Area (AfCFTA) for Ghana: An application of partial equilibrium model

Abstract

This study estimates the potential implications of the implementation of African Continental Free Trade Area (AfCFTA) Agreement for Ghana in terms of trade, welfare and revenue effects. By applying the WITS-SMART simulation model on 2018 disaggregated international trade data, the paper finds that total trade effects in Ghana are likely to surge by US$ 148.3 million while promoting consumers' welfare by US$ 8.597 million. However, revenue losses are imminent as the country might experience a drop in tariff revenue of US$ 8.604 million. Overall, the free trade area is expected to improve on the country's trade balance as exports are envisaged to outweigh imports. In order to mitigate the revenue losses, the paper recommends that the country keep substantial portion of tariff lines for sensitive and excluded products over a longer period during the liberalization.

Effect of productive capacities on tax revenue mobilization: Evidence from Sub‐Saharan African countries

“…The determinants considered include GDP per capita in that the fiscal capacity of countries is intrinsically linked to their level of development (Bayale et al, 2022; Chebochok & Bayale, 2023; Crivelli & Gupta, 2014) and trade openness as an increase in the volume of trade would contribute to an increase in tax revenues from customs duties and corporate profits in particular (Gnangnon & Brun, 2018). Following Medina et al (2017), Elgin et al (2021) and Bayale et al (2023), we also include informal economic activity, measured by the share of informal output (% of GDP), as African economies have a large informal sector.…”

“…The determinants considered include GDP per capita in that the fiscal capacity of countries is intrinsically linked to their level of development (Bayale et al, 2022;Chebochok & Bayale, 2023;Crivelli & Gupta, 2014) and trade openness as an increase in the volume of trade would contribute to an increase in tax revenues from customs duties and corporate profits in particular (Gnangnon & Brun, 2018).…”

“…This encompasses all the dimensions that enable an economy to exploit its potential, namely human and natural capital, energy resources, institutions, transport, information and communication technology (ICT), structural change and private sector development. Much empirical work has recently highlighted the effect of some of these dimensions on economic growth (Bayale et al, 2022; Duodu & Baidoo, 2022; Singh & Pradhan, 2022), on productivity and participation in regional or global value chains (Acemoglu et al, 2005; Anderu Kej, 2021; Bustos et al, 2020; Erumban et al, 2019; Gniniguè et al, 2022; McMillan et al, 2014; Pelinescu, 2015; Sertoglu et al, 2017; Wonyra, 2018; Wonyra & Bayale, 2022).…”

“…Over the past few decades, the financing of African economies is a topic that has been attracting interested researchers and international organizations. In 2015, the United Nations Conference on Financing for Development held in Addis Ababa emphasized that increasing in tax revenues is a key lever for development in Africa (Bayale et al, 2022;Chebochok & Bayale, 2023). Distinctly, the resources available to the majority of African countries come either from tax revenues support of development partners, foreign direct investments and migrants' remittances.…”

How Can Tariff Elimination and Trade Facilitation Affect East African Economies?

“…The few studies on the potential economic effects of the AfCFTA are largely dominated by reports from institutions such as the World Bank (World Bank, 2020), International Monetary Fund (Abrego et al, 2020) and United Nations Economic Commission for Africa (ECA, 2018). Other empirical studies focus on a single country, such as the studies on Malawi (Masiya, 2019), Ghana (Bayale et al, 2022), Togo (Wonyra & Bayale, 2022) or a group of countries, such as Central Africa (Fouda Ekobena et al, 2021). As for analyses of the impacts of the AfCFTA on the East African subregion, there are empirical studies on Kenya (Nechifor et al, 2021), Tanzania, the East African Community (EAC) (Shinyekwa et al, 2020) and the common market for Eastern and Southern Africa (COMESA) region (Wanyonyi & Chemnyongoi, 2020).…”