Mitigating the socio-economic ramifications of coronavirus on Ghana’s economy; the need to utilize heritage fund

Undoubtedly, the sudden upsurge of the novel virus dubbed COVID-19 continues to disrupt economic activities across continents and posing pronounced threat to human existence in the entire global hemisphere. The epicenter of the coronavirus believed to have emerged from Wuhan in the Hubei province of China has, indeed, redefined the economic growth path for most economies. This is based on IMF recent declaration that the world is now facing a global recession amidst the era of covid-19 and thus much requires to be done to resuscitate the economic damages that is conspicuously embattling most economies.

ECONOMIC STAGNATION

The contagious nature of the disease has prompted most economic activities to come to a halt since global giants such as Apple, General Electric, IKEA and other multi-national firms have suspended production in efforts to combat the devastating virus. The most worrying situation is the disruptions in the Global Value Chain Systems as most countries, predominantly those located in the global southern hemisphere, import goods from China either for final or intermediate consumption. It is therefore without reservation that the output contraction in China has ultimately triggered supply shocks to most economies.
Indeed, in sub-Saharan Africa, the fact that Ghana is perceived as the 7th largest trading partner with China cannot be over-emphasized, looking at the wide array of imports ranging from electronic products, machinery and equipment, apparels, agricultural products, industrial chemicals coupled with those unavoidable logistics that contributes to the improvement in the country’s GDP. As the trend virtually makes the country import-dependent on the Chinese economy, the emergence of covid-19 has conspicuously led to the limited supply of general goods into the Ghanaian economy which has contributed to near destabilization and eventual collapse of substantial number of domestic firms operating in our jurisdiction.

It is, therefore, significant to note that certain vital sectors that positively support the Ghanaian economy in revenue generation have been negatively affected by the Covid-19 pandemic; as such the country’s projected total revenue estimated to be in the region of approximately 67billion Ghana cedis is unlikely to be met for the year 2020. Indisputably, the current downtrends affecting international oil prices, the tourism and hospitality industry, which is virtually on its knees, the Ports and of course the various conventional revenue mobilization entities are pointers that all have woefully been inundated by the explosion of CORONAVIRUS.

In this connection, there is therefore no doubt that once such projection becomes manifested, there would definitely be difficulty in meeting government projected set targets that would ensure provision of much needed developmental projects and infrastructure unless of course there is the applicability of a strategic economic formula to neutralize the unexpected shocks arising out of the pandemic.

THE WAY FORWARD

The above notwithstanding, government establishment of Covid-19 alleviation fund is a step in the right direction as it seeks to improve the welfare of most vulnerable and the needy in the society. Conversely, it is quite obvious that the fund would lead to cushion those local industries which have been conspicuously hard hit by the negative effects of the novel virus.
Over again, there is the need for the government to come out with some form of compensation packages such as soft loans at zero rate interests for workers who may lose their jobs in the midst of this deadly outbreak and who may be interested to invest in some profitable ventures since the informal sector is perceived as engine of growth.

Although much as the fiscal targets of the government would likely be missed for the year 2020, it will be very much prudent to lower corporate tax and income tax rates so as to boost consumption and investment in the economy. This will ultimately help boost spending and consequently enable SME’s to regain their feet in this era of Covid-19.

Ultimately, the recent call for the utilization of the heritage fund to mitigate the economic damages borne out of the emergence of the novel pandemic is a judicious decision under our present state of affairs as this would be a rational approach of freeing up resources for closing the fiscal gap rather than borrowing which may end up ballooning our public debt stock.

King Effah – Nkyi. (Mres Economics, University of Essex, UK)
Email: [email protected]