In: Economics
The World would not be same again. In the last 15 Pandemic events from the 14th century, the world has never remain the same and Covid-19 would not be an exception. The long term economic hangover is just beginning to birth. Though monetary and fiscal measures have been ramped up to ease the short term effect historical trend suggest the long term adverse economic distributional effects could persist for a generation or more. Covid-19 has created huge financing gaps reflecting dwarf domestic mobilisation and elevated health related and economic stimulus intervention.
The International Monetary Fund (IMF) (2020) states “more than ever, Sub-Saharan African countries also need large-scale external financing. The International Monetary Fund and the World Bank estimate that the region faces a government financing gap (assuming a modestly supportive fiscal stance) of at least $114 billion in 2020. African governments cannot mobilize this amount domestically”. The World Bank and the African Development Bank (AfDB) despite the uncertainty surrounding the AfDB presidency have been stepping up financing. Recently, G20 announced an important initiative to suspend debt-service payments until the end of 2020 for poor countries that request relief though some countries have expressed reservations and their unwillingness to sign up for this initiative.
Here in Ghana, the macro-fiscal impact of Covid-19 is well documented reflecting in the projected GDP decelerating from 6.8% in the 2020 budget to worst scenario of 1.5% given the partial lockdown and the fiscal deficit escalating to GHS 30.2 billion from GHS 18.9 billion. Bank of Ghana has in response to the impact of Covid-19 given the elevated fiscal deficit adopted Asset Purchase arrangement under a Quantitative Easing (QE). The Central Bank indicated it stands ready to support government with GHS 10 billion in the wake of the coronavirus pandemic. Out of this, the Bank has already purchased a Government of Ghana COVID-19 relief bond with a face value of GH¢5.5 billion at the Monetary Policy Rate with a 10-year tenor and a moratorium of two (2) years (principal and interest). Ghana like many other countries is in the second stage of the Covid-19 where we have decided to live with the virus unlike the first stage where the focus was on containment and the last stage when vaccine is developed hopefully.
Kindly Attempt the following questions
A) The economic situation of different countries will not be the
same as before. after the widesread of disese COVID 19 many
countries like india, china, US faces financila crisis. So they
cannot move ahead without any support from monetary authorities .In
such a situation G20 announced an important initiative to suspend
debt-service payments until the end of 2020 for poor countries that
request relief though some countries have expressed reservations
and their unwillingness to sign up for this initiative. The G20
should provide significant financial assistance through grants and
concessional loans to the poor and developing countries that
desperately need funds to augment their public health
infrastructure and to revive the economy. G20 Formed in 1999, It
has a mandate to promote global economic growth, international
trade, and regulation of financial markets. G-20 is a forum, not a
legislative body thus its agreements and decisions have no legal
impact, but they do influence countries' policies and global
cooperation.The main purpose G20 are firstly to take care of Policy
coordination between its members so as to realize global economic
stability, sustainable growth ,To promote financial regulations
that reduce risks and stop future financial crises. On March 26,
2020, an extraordinary virtual G20 leaders’ summit took place and
discuss global plans to tackle the public health and economic
challenges posed by the coronavirus pandemic (COVID-19).
Singapore , spain,europe etc are the which are not a member of G20.
Spain should be included by an outsized margin indeed, but the
matter is Europe has too many countries that ought to be included,
the G20 restricted the countries from Europe to avoid it
concentrates half the organisation, and Spain was the colateral
damage of restricting European membership.
B) The options of fiscal and monetary resposes are limited in the
current situation of COVID 19. Most developed countries have made
massive economic responses to the COVID-19 pandemic, ramping up
spending and using monetary policy to cushion the blow of lockdowns
and other measures that have pack up businesses and left huge
numbers unemployed. The authorities increased the frequency of
monetary Stability Committee meetings, enhanced the monitoring of
early signs of liquidity stress, and reviewed banks’ business
continuity plans. Da Afghanistan Bank (DAB) has suspended
administrative penalties and fees, postponed the IFRS-9
implementation to June 2021, and froze loan classifications at the
pre-pandemic cutoff of end-February.Recent Developments. Ghana's
economy continued to expand in 2019 because the half-moon gross
domestic product (GDP) growth was estimated at 6.7%, compared with
5.4% within the same period of last year. Non-oil growth was also
strong at 6.0%.
C) The breakdown of corona caused shut down of many staes of Africa
.It affect economic growth og Ghana ,nigeria and many staes.Due to
the production industries shutdown and supply chain disruption
America is b;locked from aceesing goods and components.most of the
companies were unable to reach thier project locations due to the
shutdown and travel bans it was mainly affected to the construction
comapnies. Due to thr restrictions in travelling durin the
widespread have affected the essential transportations og goods and
many countries have cancelled the orders. Ghana has expected a real
GDP groeth of 5.8% in 2020but lowered oil price during covid has
not realised the expectation. The Ghanian currency was alwyas
endangeredc to all political and other reigonal factirs. Inoder to
avoid the balance of payment crisis the stae has requested foor
financial assistance from IMF and World bank. The country was
requested of about USD540 million to balance the financial
crisis.