Question

Discuss the implications of the widespread disruptions to global, regional supply for Ghana’s Balance of Payments

Answer 1

Covid-19 pandemic has devastated the world economy. Most of the countries have already entered into a deep slump, with steep fall in aggregate demand and massive supply chain disruption leading to fall in aggregate supply as well across countries.

Ghana has also faced similar negative impact of the pandemic on its economy, with closure of factories, industries, and other businesses leading to millions of job losses, which in turn has led to massive fall in aggregate demand and disruption in the local, regional as well as international supply chain.

Ghana's balance of payments' most recent data, available of the first quarter 2019, shows that the country had a net surplus worth $3 billion. With surplus current account, financial and capital account, the balance of payments was favorably placed.

However, given the disruption in supply chain, international trade has already fallen down, leading to fall in exports as well as imports. Adverse impact on aggregate demand of the world economy would also lead to a considerable fall in demand for Ghana's exports in the short term. Outflow of portfolio investments and other foreign currencies has already put downward pressure on the exchange rate.

Overall we can say that the balance of payments may remain negative in the short to medium term, and government must take rational actions to reduce its negative impact on the economy and people.