Question

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.

Answer 1

                                    The Covid-19 crisis has hit the global economy as a whole and its impact on the economy of Ghana is no different. Although a budget statement was presented in November 2019, the impact of the crisis has resulted in making differences to the statement and thus a revised budgetary analysis was presented in March 2020. Let us first analyze the key features of the two budgets to study the impact of the crisis on the economy of Ghana

Features and summary of Budget presented in November 2019

· As per the theme ‘Consolidating the gains for growth, jobs and prosperity for all’, more emphasis was given to extending of job opportunities for all

· The overall GDP growth rate was projected at 6.8% and the fiscal deficit at 4.7%

· The end period inflation was estimated to be around 8%

· There was a proposed 12% increase in the minimum wages and also the minimum wage earners were to be exempted from the taxation

· The money spent on marriage relief, child education and old age relief was to be increased.

The above were the major introductions in the budgetary presentation of November 2019. The following are the major impacts on Covid-19 on the economy of Ghana due to which a statement was put forward by the ministry of Ghana

Impacts of Covid-19 on the economy of Ghana and statemen of March 2020

· Most of the stock markets have been clashed in Ghana and as many as five out of eight major banks have experienced a fall in their share prices

· The debt to GDP ratio has been increased to more than 59%, with almost 32% of the debt belonging to the category of external debt

· The global GDP growth of 3.3% would slow down to less than 2.9% and thus Ghana’s estimated GDP growth rate is expected to fall from 6.8% to 2.6%

· Ghanaian cedi of 572 million has been set apart to fight the corona virus impact on the nation and the cost of preparedness and response plan has been estimated to be about 9505 million Ghanaian cedi

· Being an import driven economy, the crisis is expected to have more impact on the international trade of Ghana

· There has been an estimated slowdown in investments and the decline in oil demand

· With decline in tourism and unanticipated rise in the health expenditures, much of the expenditure has been set for the same

· There has been a lowering in the cap of Ghana Stabilization fund from the current $300 million to $100 million with the transfer of excess fund to the Corona Alleviation Fund

· There has been a reduction in the policy rate by 150 basis points to 14% and drop in regulatory reserve requirement from 10% to 8%

Thus, all the above policy changes have been introduced by the government of Ghana in response to the impact of Covid-19 on the economy of Ghana