ACEP's Analysis Of The Finance Minister's Statement On The Economic Impact Of Covid-19 Pandemic On The Economy Of Ghana
The Minister of Finance presented the economic impact statement on the effect of COVID19, the global pandemic, to parliament on the 30 of March 2020. ACEP had earlier recommended to African governments, particularly oil producing nations, to reexamine their fiscal projection for the year in order to account for the slumping oil price. It is, therefore, commendable that Ghana, like Nigeria and Algeria, has taken steps to revise expectations for the year. Certainly, the moment is an extraordinary one that requires significant recalibration of the budget to prop the economy and flatten the curve of the COVID-19 cases.
The statement highlighted fiscal challenges arising mainly from oil revenue and tax revenue from imports, both of which are under severe attack by the effects of the pandemic and the attendant low oil price. The Minister projects a revenue loss of GHS5.6 billion, about 54 percent of projected loss of revenue, from oil and non-oil revenue loss of GHS2.254 billion. Additionally, the programmed initial intervention in the health sector to contain the spread of the disease required GHS572 million. This, in addition to GHS1,250 million for the new Coronavirus Alleviation Programme (CAP) to support businesses and households, widens the fiscal gap for the financial year. Hence, yielding a total fiscal unplanned deficit of GHS9.505 billion.
The oil revenue shortfall is estimated using a projected average price of $30 per barrel. This is prudently conservative to mitigate further shocks as the oil market remains unstable with declining demand at the peak of supply and raging battle for market share by Saudi Arabia and Russia. ACEP however maintains that oil price is likely to average $40 for the year.
The measures proposed by the Minister of Finance to realign the budget from the oil revenue perspective include the following: cutting expenditure by GHS1,248 million; lowering the cap on the Ghana Stabilization Fund (GSF) to cream off the excess for financing the CAP; reducing revenue allocation to Ghana National Petroleum Corporation (GNPC); perhaps the most controversial of the measures is the proposal to amend the Petroleum Revenue Management Act (PRMA) to allow the use of the Ghana Heritage Fund (GHF) to support the budget.
It is important to recognize that the socio-economic impact of the pandemic cannot be avoided by any nation on earth, though countries have varied economic power to deal with the disease domestically. However, either rich or poor, countries have soothing fiscal and non-fiscal mechanisms that help to manage the impact of such rare occurrences. In the foregoing conversation about Ghana’s preparedness and the Economic Impact Statement presented by the Finance Minister to Parliament, the country is exposed on two fronts: