The Finance Minister, Ken Ofori-Atta, has outlined in a statement submitted to parliament on March 30, 2020 some potential impacts of the COVID-19 pandemic on the economy and the measures by the government to mitigate the impact.
In his statement, he indicated that eight main sectors of the economy were likely to be affected more by the virus.
The sectors included; the hospitality industry, investments, trade and industry, agriculture, commodity prices, exchange rates, financial sector and GDP growth.
The Minister indicated that the slowdown of activities in these sectors would affect the country’s debt servicing and overall GDP growth.
“Even though events on the coronavirus pandemic are still unfolding, a preliminary analysis of the impact of the Coronavirus menace on the real sector shows that the 2020 projected real GDP growth rate could decline from 6.8 percent to 2.6 percent,” he stated.
He said the projected GDP could be worse in the event of a total lockdown of the country.
Potential fiscal impact
Highlighting the potential fiscal impact of the virus, he said preliminary analysis by the Ministry of Finance predicts that the virus would significantly affect the country’s petroleum receipts, import duties, tax revenues, and also increase health- related expenditures.
“Preliminary analysis shows that at an average crude oil price of US$30 per barrel for year 2020, Government will register a shortfall in crude oil receipts amounting to GHȼ5,679 million,” he noted.
He said the ministry was also anticipating that the decline in import volumes and values, as well as the slowdown in economic activities, would lead to shortfalls in both import duties and other tax revenues.
“Based on the performance of import duties to date, as well as assumptions on projected decline in import volumes and values, preliminary analysis shows that import duties will fall short of target by GHȼ808 million for the 2020 fiscal year. Similarly, the projected slowdown in non-oil GDP as a result of the coronavirus pandemic is expected to result in shortfalls in tax revenues (excluding oil tax revenues and import duties) amounting to GHȼ1,446 million, bringing the total estimated shortfall in non-oil tax revenues to GHȼ2,254 million,” he explained.
Proposed fiscal measures
To help mitigate the fiscal impact, Mr Ofori Atta outlined some measures which included the lowering of the cap on the Ghana Stabilisation Fund (GSF) from the current US$300 million to US$100 million in accordance with 16 Section 23 (3) of the Petroleum Revenue Management Act (PRMA).
He also indicated that the ministry was arranging with the bank of Ghana to defer interest payments on non-marketable instruments estimated at GHȼ1.22 billion; and adjust expenditures on goods and services and Capex downwards by GHȼ1.24 billion.
He also outlined plans to secure a credit facility of GHȼ1.71 billion from the World Bank and another credit facility of GHȼ3.14 billion from the International Monetary Fund.
In what may not go down well with many, the minister also proposed the amendment of the PRMA to allow a withdrawal from the Ghana Heritage Fund to undertake urgent expenditures in relation to the Coronavirus pandemic.