The impact of COVID-19 Pandemic on Ghana’s Economy

An update of the Fiscal Impact analysis of the COVID-19 pandemic on the economy of Ghana has revealed that the country’s economy will be badly hit if proper measures are not put in place to mitigate the damage, according to the Government’s official sources.

“Mr. Speaker, a re-calibration of the 2020 Fiscal Framework underpinning the approved 2020 Budget to reflect the fiscal impact of the coronavirus, as outlined above, without incorporating measures, shows that the overall fiscal deficit will increase from the programmed GHC 18.9 billion (4.7% of GDP) to GHC 30.2 billion (7.8% of revised GDP). The primary balance will correspondingly worsen from a surplus of GHC 2,811 billion (0.7% of GDP) to a deficit of GHC 5.6 billion (1.4% of GDP).”

This was relayed to Parliament by the Finance Minister, Ken Ofori-Atta on Monday, March 30, 2020 when he made a statement on the Floor of the House to update Parliament on the Economic Impact of the novel Coronavirus pandemic on the economy of Ghana.

According to the Finance Minister, even though events are still unfolding, preliminary analysis undertaken at the Ministry of Finance shows that the novel coronavirus pandemic will result in: significant shortfalls in petroleum receipts; shortfalls in import duties; shortfall in other tax revenues; increased health-related expenditures; and tight financing conditions.

Total Estimated Fiscal Impact of COVID-19  

He indicated that the total estimated fiscal impact from the shortfalls, the cost of the preparedness plan, and the cost of the Coronavirus Alleviation Programme as announced by President Akufo-Addo in his last broadcast to the nation as part of government’s intervention against the COVID-19 Pandemic, is a little over 9.5 billion Ghana Cedis, about 2.5 percent of the revised GDP.

Effectively, this is set to negatively impact on government’s fiscal policy for the year ending December 31, 2020.

Shortfalls in Petroleum Receipts

As at 30^th March 2020, crude oil prices were down to USD$22.9 per barrel from the December 2019 price of USD$65.9 per barrel. Preliminary analysis shows that at an average crude oil price of USD$30 per barrel for year 2020, Government will register a shortfall in crude oil receipts amounting to GHC5, 679 million.

The corresponding projected shortfall in Annual Budget Funding Amount (ABFA) is GHC3,526 million; while shortfalls in the Ghana Stabilization Fund and Ghana Heritage Fund are GHC 1,058 million and GHC 453 million, respectively. Projected shortfalls in transfers to GNPC is GHC642 million.

Shortfalls in Tax Revenues

According to Ken Ofori-Atta, “preliminary analysis shows that import duties will fall short of target by GHC808 million for the 20202 fiscal year. Similarly, the projected slowdown in non-oil GDP as a result of the coronavirus pandemic is expected to result in shortfalls in tax revenues amounting to GHC1, 446 million, bringing the total estimated shortfall in non-oil tax revenues to GHC2, 254 million.”

Cost of Preparedness and Response Plan

However, the initial cost of programmes and activities under the COVID-Preparedness and Response Plan is about GHC572 million (USD100 million).

Coronavirus Alleviation Plan

Meanwhile, the Ministry of Finance is expected to release an amount of One Billion Ghana Cedis upon approval by Parliament to mitigate the impact of the coronavirus on businesses and households and ensure that economic activities are sustained, whiles minimizing job losses per the establishment of the Coronavirus Alleviation Programme (CAP) announced by the President on Friday, March 27, 2020.

Source: Clement Akoloh || businessweekghana.com