Question

In: Economics

The government of Ghana through the Minister of Finance presented the 2020 Budget statement to Parliament...

The government of Ghana through the Minister of Finance presented the 2020 Budget statement to Parliament in November 2019.The Coronavirus Disease 2019 (COVID -19) pandemic that has hit the world has impacted on global economy including Ghana, thus affecting our macroeconomic targets in the budget statement presented in November 2019. The Minister of Finance presented a statement to Parliament on the economic impact of COVID – 19 pandemic on the economy of Ghana and the way forward at the end of March, 2020. Discuss five (5) key impact of the COVID-19 on the achievement of our fiscal policy targets for the year 2020 by comparing the original budget statement to the one presented after COVID- 19.

Solutions

Expert Solution

The budget presented by the finance minister on Novermber 13, 2019 had following five key fiscal policy targets:-

( I ) Overall annual GDP growth rate target was kept at 6.8%.

( II ) Fiscal deficit target was kept at 4.7% of GDP.

( III ) Annual inflation rate target was presented to be 8%.

( IV ) Revenue target for the fiscal year was kept at GHc 67.1 billion.

( V ) Fiscal expenditure was aimed to be GHc 84.5 billion.

Impact of COVID-19 on policy targets:-

Like other countries in the world, COVID-19 pandemic has plunged the country into recession.

( I ) Overall GDP growth is expected be -5 %. What it means is the country is expected to see a recession with -5 $ of GDP growth this year.

( II ) Fiscal deficit targets may be raised by at least 3-4% this fiscal year.

( III ) Economy may see a deflationary trend this year due to sudden fall in aggregate demand as well as supply.

( IV ) Revenue receipts may fall by at least 50%.

( V ) The government may cut expenditures in other sectors of the economy to compensate for extra expenditure incurred on healthcare due to the pandemic.


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