Government has been advised to use part of the money raised from the US$3 billion Bond in January to keep the economy in a holding pattern during the lockdown to reduce its blowback on citizens and businesses.
A former Executive Director of Standard Chartered Bank, Alex Mould further admonished that, government will need to seek funding from the multilateral development banks such as the World Bank, AfDB, and IMF to stimulate the economy post-lockdown. “Looking at the median spend by most countries this comes to about 1-2% of GDP; if we use the average of 1.5% of GDP this brings our required spend close to US$1 billion.”
The financial expert has intuited that, Government should resist the temptation to prematurely end the lockdown in haste; but must weigh both global and local conditions in order to make a well-informed decision for the long-term greater good of Ghanaians. In the interim, some interventions can be immediately implemented to improve the prevailing state of affairs. He indicated that, there will be two economic phases in tackling the crisis arising from this COVID-19 pandemic by governments, especially in the developing and less developed countries.
“The first phase is to address the effects that a prolonged lockdown of approximately 2-3 months will have on families and businesses. Most individuals may be forced to expel their savings to survive in the lockdown period as their income and/or revenue dwindle. And the second phase is how to restore the economy back on track, post crisis”, he explained.
Also, the expert suggested that, planning now for funding post-COVID-19 is essential, as demand is expected to be down for most discretionary spend sectors i.e. tourism (airlines, hotels), entertainment (restaurants), retail, etc.
“Also, we can expect lower than normal savings’ balances in the banks resulting in needed support from government in the form of reducing reserve requirements and injection of new money to achieve the liquidity needed for new loans. Banks will have to provide the much-needed funds in the form of soft loans to qualified companies, small and medium enterprises etc. – including traders – who form the backbone of the informal sector.
“For starters, the vulnerable- i.e. aged, distressed families, street children/hawkers, homeless etc.- in our society have to be catered for. One way this can be achieved is by providing financial support and funding to them.”
According to Mr Mould, as mentioned earlier, small and medium businesses particularly will be heavily hit; and thus require some much needed assistance in the form of tax reliefs, stimulus packages etc. to stay afloat, as they will most likely struggle to pay employees due to the COVID-19 pandemic. Government can lend a helping hand by suspending payments of employee and employer social security and income tax of private companies, to allow them use the cash in other ways. Banks and financial institutions can provide qualified businesses with liquidity in the form of zero interest loans and “tide over” soft loans to encourage furloughing instead of outright layoffs; so they can protect jobs by keeping on as many staff as possible.
“Additionally, government needs to immediately curb inflation and start planning for the post- COVID-19 recovery of the economy to avoid a recession. There is bound to be a logistics and supply chain gap to and from lockdown areas, which will consequently cause price hikes. Food security will come to the fore and of not tackled this could become a National Security issue; so, with respect to agricultural produce, the Ghana National Buffer Stock Company has a critical role to play in bridging this supply chain gap so as to ensure regular sustainable availability of food and more importantly keep inflation of food items at a minimum.
“These supply chain challenges will not only be felt on the local front, but globally as well. How will our foreign supply chain be impacted? Importation will inadvertently be affected as there is a dependency on and preference for foreign essential goods over local goods. Government would therefore have to ramp up local manufacturing to meet demands. For instance, in the COVID-19 fight there has to be a local content re-alignment of businesses and infrastructure to meet human and medical needs. Local manufacturing of PPEs e.g. retooling seamstresses to make masks, carpenters to make beds for medical facilities etc.”
Source: Adnan Adams Mohammed
