Question

Question 1

The novel corona virus disease (also known as COVID – 19) which started in WUHAN in December 2019 has grounded the global economy to a halt. World crude prices reached their lowest and trade among nations have generally slowed. Production has slowed and jobs are being lost across the globe.

Globally, over seven million people have contracted the virus and over four hundred thousand have died. Ghana announced its first two confirmed cases of COVID – 19 on 12 March, 2020 and as at June 14, 2020, the number of confirmed cases stood at 11,964 with 54 deaths. The impact of the COVID – 19 pandemic on Ghanaian economy and the global economy at large is predicted to be very severe. The government of Ghana, like many other governments, is spending more funds on containing the pandemic and limiting the effect of the pandemic on the economy. The IMF Executive Board approved the disbursement of US$1 billion drawn under the Rapid Credit Facility (RCF) for Ghana on April 13, 2020 after receiving application from the country’s government.

Given this background, briefly discuss

1) the repercussions of the corona virus pandemic for the Ghanaian economy and foreign exchange market.

2)Suggest ways of mitigating the effects of covid – 19 on Ghana’s balance of payments (BOP).

Answer 1

1)

The repercussions of the corona virus pandemic for the Ghanaian economy and foreign exchange market are going to be severe. Due to lockdown worldwide demand for crude oil has plummeted. This has affected Ghana and other oil producing countries. Crude oil prices decreased thus reducing the export revenue for Ghana. This creates BOP problems as trade balance will deteriorate. As the exports of Ghana reduces their foreign reserves will deplete too, this will create problems for the exchange rate too. Currency of Ghana will depreciate.

2)

Ways of mitigating the effects of covid – 19 on Ghana’s balance of payments (BOP)

a) Reduce imports - Ghana should try and be self reliant. More and more industries should be set up to produce the goods which are imported from other countries. This will not only improve BOP but also produce employment within the country.

b) Increase exports - As crude oil demand is low, Ghana should focus on other products which still have demand worldwide and try producing and exporting the same. One example can be PPE and masks, demand for which worldwide is huge. This will not only improve BOP but also help Ghana to fight this pandemic.