Question

Question 1

It has been predicted that post covid-19 macroeconomic indicators may be discouraging, which may lead to worsening economic conditions. Ghana therefore, should prepare for the task ahead.

Required:

a) Identify the possible tasks ahead of government as implied in this case and discuss their impact on Ghanaians. not less than two pages

NB: You may use diagrams where necessary

Answer 1

Solution:

Covid-19 current situation in Ghana: Till 27th June, 2020 Ghana ranked 55th among the world countries in terms of total number of cases of global pandemic Covid-19. As per the data provided by Ghana health service department we can understand the current situation of Covid cases in Ghana by fig-1.

16742 Total Corona Viruses Case

12720 Recovered Case 3910 Active Case 112 Death

  

Covid-19 Impact on Ghana Economy:

Export: Ghana economy is export oriented where export contribution is 35% of Ghana GDP. Three major products petroleum, gold and coca contribute more than 80% of total export data. Ghana export is hit by covid situation as the demand of petroleum is shrinking and petroleum prices are hit worse from 3rd quarter of 2019. But gold price rise has some positive impact.

Impact on GDP Growth: Ghana’s estimated GDP growth is set to plummet from a target of 6.8% to about 2.6% in 2020.

Total Fiscal Impact: Due to global Pandemic Covid-19, Ghana facing total fiscal impact of GH₵ 9505m which includes all revenue shortfalls due to Covid-19, cost of preparedness plan and government response expenditure towards fight against global pandemic.

Possible Task Ahead of Ghanaian Government to fight this pandemic:

Ghanaian Government must targeted at stimulating economic growth considering that Covid-19 has already begun to slow down economic activities and the impact could get worse in the next couple of months. Aside the stimulating measures adopted, Government should focus to cut down on expenditure. This suggests that, Government’s initial plan to significantly uplift the country’s infrastructure in 2020 is not likely to materialize.

Following steps must be targeted by government to revive Ghana economy:

1. Establishment of corona virus focused economy alleviation fund to facilitate economic recovery.

2. Lowering of the cap on Ghana Stabilisation Fund (GSF) from the current to allow for transfer of excess funds to fight current situation.

3. Adjust expenditures over goods and services and reduce it upto GH₵ 1.2 b.

4. Amendment in Petroleum Revenue Management Act (PRMA) to allow for withdrawal from the Ghana Heritage Fund to aid in fighting Covid-19.

5. Reduction in the policy rate and drop in regulatory reserve requirement to increase supply of credit to private sector.

6. Focus on External financing from world bank and IMF to support economy.

7. Over and above all tax relief like extension of return filling due dates, Grant a remission of penalties on principal debts to Tax payers, Waive VAT on donations of stock of equipment and goods for fighting the Covid-19 Pandemic, Permit the deduction of contributions and donations towards COVID-19 as allowable expense for tax purposes, etc.

Impact on Ghanaians:

Ghana must appreciate following positive impact due to current situation:

1. Opportunities are provided for import substitution, thereby, enhancing local production of goods and services.

2. Opportunity to boost domestic production and consumption of some food commodities, such as rice, maize, cassava, yam and chicken and export of commodities for which Ghana has comparative advantage in to trade within the West African Sub-region, among countries that have not closed their borders to cargo.

3. Due to reduction of petroleum exports, local petroleum price has been reduce drastically. Effect of this is the domestic transportation cost, manufacturing cost has been declined.

4. Due to rise of price of gold Balance of Payment has been improved. Also decline of imports has improved balance of payment.