Coronavirus And Its Impact On Ghana's Economy
The novel coronavirus continues to be disruptive to the global financial market and supply chain. Ghana is no exception to the impact of this pandemic. Globally, the world economy has been stretched to realign policies to areas of healthcare and social interventions.
It has become imperative in these challenging times to channel all resources to curb and contain this canker. The speech by the President of Ghana has resonated with the entire world. He remarked “we know how to bring the economy back to life but don't know how to bring people back to life ''. This is a call on citizens to join hands with the state to curtail the spread of the virus.
Countries all over the world have adopted the World Health Organization (WHO) protocols in an attempt to prevent the spread and instigate the flattening of the curve for COVID19 cases. The approach adopted globally has predominately been a partial lockdown of all sectors of the economy with the exception of essential services. Cumulatively, the ripple effect is projected to have a devastating impact on the Ghanaian economy, which is largely made up of the informal sector.
In effect, COVID 19 has affected the government’s budget for 2020 i.e. in terms of revenue mobilization and expenditure in areas of priority. The pandemic will impact adversely on Gross Domestic (GDP) growth, invariably lead to a shortfall in petroleum revenues, import duties and tax revenue and then lead to an increase in healthcare expenditure.
The expected decline in import volumes and values cumulatively will lead to a shortfall in expected tax revenue. The projected import duties for 2020 is GHS808 million will not be achieved. The Petroleum Revenue Management Act (815) crude oil price was programmed to be US$62.60 for the 2020 fiscal year. Preliminary analysis of the average crude oil price per barrel is US$30.00 for the 2020 fiscal year, the sharp decline in crude oil prices will lead to a fall in expected petroleum revenue.
The impact of COVID-19 has affected all facets of the economic bracket from industry to households because global economic activities have not been full scale. The pharmaceutical industry in Ghana has risen to the call of the President by optimizing the production of drugs and sanitizers. This act broke the artificial upsurge in prices of sanitizers which quadrupled overnight based on market forces. Globally, the government budget is expected to explode due to the unanticipated impact of COVID19. It's expected that Fiscal Responsibility Act, 2018 (Act 982) threshold of 5 % will not be attained due to the impact of coronavirus. The Finance Minister Ken Ofori Atta anticipates a 7.8 % rise in the fiscal deficit. In effect, the deficit is expected to increase from GHS 18.9 billion to GHS 30.2 billion – the variance will be 2.9 percent of GDP.
Ghana Association of Bankers is in the final stage of discussions with the Bank of Ghana, the Finance Ministry and other banks to set up gross loans on preferential terms to essential sectors, such as the pharmaceutical industry. Globally, the world economy has been carefully considering policies to cushion the impact of COVID19 on the economy. The UK government plans to pay 80% of salaries for those not working due to the coronavirus crisis or companies fail to keep staff on the payroll and rather lay them off. The United States’ $2 trillion aid package is expected to save jobs and bailout companies.
Banks have agreed to a general cut of a 200 basis interest on all existing locally dominated currency loans and new loans in Ghana. This policy direction is to cushion businesses against any shocks during and after the pandemic. The groans of people in the informal sector have escalated since the restrictions on movement began.
The Ghanaian informal sector participant largely depends on what we tend in the local circles ''hand to mouth”. The detrimental impact of the two weeks' lockdown has led to a reduction in savings and business capital. Civil societies, churches and the government have attempted to alleviate the burdens of deprived communities with supplies and cook meals without a carefully thought out plan of mitigating the effect of lockdown in these communities and how the desired results of curtailing the spread of the virus will be achieved.
The private sector with industries that do not fall within the exempt bracket has been hard hit, with direct costs of operations such as salaries, rent and loan interest obligations which cannot be deferred, accumulating day in and day out. In effect, if the ‘arrest’ of the virus is not immediate, the pending ripple effect will lead to more businesses fading out and massive employees’ retrenchment for the affected businesses to cut down their losses.
This pandemic has become a bane on all facets of the Ghanaian economy. i.e. household, firms and industry.
The Ghanaian government has become innovative with social interventions such as assuming responsibility for water for the next three months, free bus rides for the health workers and provision of supplies for deprived communities. These initiatives have become necessary to minimize the impact of the pandemic on households. But just like Oliver Twist, the Ghanaian people are asking for more.
In conclusion, businesses and households will appreciate subsidies on the cost of utilities and a repeal of the Communication Service Tax (CST) to reduce the cost of data. The Ghana Health Service must adopt a comprehensive approach of mass and random testing to curtail the spread of the virus. We are living in interesting times were tenets of information i.e. timeliness, specificity and relevance are of utmost importance in how well we manage the pandemic as a country.
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