Question

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 the repercussions of the corona virus pandemic for the Ghanaian economy and foreign exchange market. Suggest ways of mitigating the effects of covid – 19 on Ghana’s balance of payments (BOP).

Answer 1

Answer :

Repercussion of COV - 19.

Due to novel corona virus aka COV - 19. There is partial or full lockdown of economy. Due to this lockdown there is decrease in demand for every commodities as people are much concern about their future. Moreover there are businesses who filed bankruptcy. Common people is facing problem of high unemployment.  

Situation in Ghana is no different here also people lost their jobs, businesses filed bankruptcy and reduction in the demand. This whole chain of low demand, high unemployment, business shutting down are co-related with each other.

Even in foreign exchange market the situation is not very bright. As there is no demand of Ghana currency due to little or no foreign trade between the countries is taking place due to COV- 19 pandemic but Ghana has to pay all its foreign transactions in dollars whether it is repayment of loan or trade settlement.

In nutshell one can understand that due to COV- 19 pandemic there is very significant adverse effect on domestic and foreign trade. Rise of unemployment, shutting down the businesses. Currencies of developing or undeveloped countries are getting weaker as time goes on.

​​​​concept of balance of payments :

Summary of all transactions made between the residents of the country and rest of the world during a particular period.

When the sum of inflows exceeds the outflows, a surplus in balance of payments occurs.

When the sum of outflow excceds the inflows, a deficit in balance of payments occurs.

Ways of Mitigating the effects of COV - 19 on Ghana's balance of payments :

1. Increae in exports :

Ghana should try to exports more goods than import. This can be achieved by building strong domestic product market which allows Ghana to export remaining domestic products after completing domestic demand. This is long - term measure can be adopted by Ghana.

2. Imposing import restrictions

Unfavorable effect on balance of payments can be mitigated by imposing the restrictions on import of foreign goods which are not necessary. Restriction can be very effective tool for short run.

In the nutshell one can understand that Ghana should try to create demand for products by giving relief package to people and businesses. With increase in demand there will be need for higher production. This will lead to higher employment.