Economic Impact Of Coronavirus on the Ghanaian Economy

NEWS COMMENTARY ON SOCIO-ECONOMIC EFFECT OF COVID-19 ON THE GHANAIAN ECONOMY.

The global rankings as at April 22, 2020 ranks Ghana at 80th position among 210 countries and territories with confirmed cases of the pandemic. Ghana ranks 6th among infected economies on the African continent. So far, Countries and Territories around the world have reported over two-point-six million confirmed cases of the COVID-19 that originated from Wuhan, China, and a death toll of about 184 thousand. The economic challenges nations are grappling with in the wake of the Coronavirus pandemic are enormous.

In Ghana, at least seven immediate- and medium term impacts of the Coronavirus pandemic on the economy have been identified. These include fall in projected revenue mobilisation from the sale of crude oil in the global market; fall in revenue projections from tariffs collection by the Ghana Revenue Authority, through the various ports; fall in periodic corporate tax payments; challenges with prompt payments on national debt or interests or both; increase in national health expenditure; significant reduction in international trade, foreign direct investments, travels, tourism, conferences, food production and financing gap in the 2020 Budget, among others.

Some economic analysts attribute the fall in price of crude oil per barrel in the global market to sharp decline in demand for the product by China. Other factors include closure of borders, and considerable decrease in exports and imports among global economies. The enactment of quarantine policies by most COVID-19-infested countries, including Ghana has impacted negatively on business operations and productivity in many sectors.

The President, Addo Dankwa Akufo-Addo, announced preventive measures to curb further spread of the Coronavirus. He also put in place economic stimulus packages to assist small- and medium-sized businesses to mitigate adverse effects of the pandemic on their trading activities and operations. These include GH¢1 billion financial assistance through the Ministry of Finance, GH¢3 billion monetary support through GCB Bank; reduction in policy rate from 16% to 14.5%; and directive by the Bank of Ghana to various banks to lower their minimum reserves requirement by 2% to increase liquidity to facilitate economic stimulation. In addition, charges on mobile money transactions from a Pesewa to GH¢100 have been waived; and respective limits on higher amounts have been increased. This is intended to improve on social distancing by limiting face-to-face transactions; and encouraging cashless transactions in the economy.

Due to the exigencies of the pandemic, Ghana’s projected gross domestic product, GDP growth rate for the 2020 financial year has been revised from 6.8% to 2.5%. Agitations by some economic analysts about sustainability of the Ghanaian economy should COVID-19 last longer than expected may be mitigated by the strong gross international reserves of over US$10 billion, which is equivalent to 4-point-8 months import cover; and in excess of the 3 months import cover projected for the current financial year. The sharp decline in inflows from crude oil is likely to be off-set by the increase in prices of gold and cocoa in the world market. The telepathic understanding between Ghana and La Cote D’Ivoire has resulted in an appreciable increase and relative stability in the price of cocoa per tonne in the global market.

The necessary remedial measures put in place by the Government of Ghana to bridge the financing gap in the 2020 budget include support from the World Bank, the International Monetary Fund, IMF and other multilateral and bilateral partners across the globe. Another option is withdrawal from the Ghana Stabilisation Fund to off-set any potential shortfall in the Annual Budget Funding Amount, ABFA.

Many were those who underestimated the propensity and magnitude of the Coronavirus on social and business activities across the globe. Today, it is stirring in the face of all and sundry. The onus lies on each one of us to find a lasting antidote to arguably, the most devastating pandemic ever encountered on the planet, earth. Undoubtedly, the world requires concerted efforts and holistic approach to curb the menace; and to halt the “carnage” inflicted on global economies by the predatory Coronavirus.

BY DR. EBENEZER M. ASHLEY, FELLOW CHARTERED ECONOMIST & CEO OF EBEN CONSULTANCY.