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

Impact of the COVID-19 on the achievement of fiscal policy targets for the year 2020 are :-

1) The situation has an impact on the right to tax, which is currently governed under fiscal policy.

2) In the event the GDP growth next fiscal turns out to be even lower – this cannot be ruled out,estimated FY21 real GDP growth for Ghana in the range of ( -)0.5% to 0.5% — the deficit would obviously be even graver.

3) States are likely to report some slippage in FY20 and the Covid-19 crisis could exacerbate their fiscal positions in FY21.

4) The government may not have the option of compressing spending in a serious manner in FY21 given the economic crisis and its obligation to give succor to the underprivileged and small businesses during the pandemic period and its aftermath.

5) Fiscal slippage that now looks imminent would make restoration of credible fiscal consolidation difficult in the short-term.

Some of the estimates made by the government might change during the course of the year. For instance, once the year gets underway, some ministries may need more funds than what was actually allocated to them in the budget, or the receipts expected from certain sources might change. Such deviations from the budget estimates get reflected in the figures released by the government at later stages as part of the subsequent budgets.