Government’s GH¢100 billion COVID-19 Alleviation and Revitalisation Enterprises Support (CARES) programme aimed at stimulating large industries to enhance job creation and foster economic revival must be properly managed or risk further shooting up the debt stock, global auditing giant Deloitte has said.
The country’s public debt stock has increased to GH¢255.5 billion, representing more than 66 percent of GDP, mainly due to the US$3 billion Eurobond and unplanned expenditure relating to the coronavirus pandemic. Unbudgeted spending shot up total expenditure (including arrears clearance) for the first half of the year to GH¢46.3 billion or 12 percent of GDP compared with the programme target of GH¢41.5 billion or 10.8 percent of GDP.
And per the structure of the CARES programme, GH¢70 billion is expected to be funded from the private sector and the remaining from government. It is this structure that, Deloitte said in its review of the 2020 mid-year budget that, if managed well, could hasten the post coronavirus pandemic-hit economic recovery, but will increase the already high debt stock if the reverse happens.
“The scope of the CARES programme appears comprehensive as it has been designed to provide support to almost all sectors considered as critical for the planned recovery and economic transformation. Key amongst the sectors targeted are health, manufacturing, financial services, education and agriculture. Whilst the programme, if managed well, could be a catalyst for the planned recovery, the funding required to implement the programme and the intended source of same could have adverse implications on our debt stock if not properly managed,” the auditing firm has stated.
Throwing more light on the statement, Country Managing Partner of Deloitte, Daniel Kwadwo Owusu, said considering the fact that the private sector is the hardest-hit with the impact of the pandemic, it will be difficult for it to raise the GH¢70 billion, thereby, becoming government’s added responsibility to provide.
“The only concern we have is that a lot of the companies in the private sector are already going through the challenges of the pandemic and so if you are looking for 70 percent financing from them and they are still recovering from the pandemic, then, they may not be able to provide the necessary counterparty financing in the short to medium term. So if that becomes the case, then, it becomes a burden on government to finance it. And given the widening budget deficit, it could be a problem and government may end up borrowing,” he told the B&FT.
The CARES programme will be carried out in two phases. The first is the stabilization phase which aims at supporting enterprises recover. These include paying outstanding obligations to contractors and suppliers; injecting liquidity into the system and ease the cash flow difficulties of businesses; developing another programme to support large business hard hit by the pandemic; and also sourcing from the pharmaceuticals and textile & garment sectors and expand procurement from local producers for its goods and services.
Other interventions in the programme are establishing a guarantee scheme of up to GH¢2 billion to enable business to borrow from banks at more affordable rates; increasing funding to the CAP-BuSS Programme being run by National Board for Small Scale Industries (NBSSI); and providing seed-fund for a retraining programme to help workers who are laid off because of covid-19 to develop new skills.
The second, which is the medium-term revitalisation phase, will also include initiatives such as supporting commercial farming by complementing the Planting for Food and Jobs and the Rearing for Food and Jobs programmes; providing targeted support to enable the private sector accelerate progress in building Ghana’s light manufacturing, technology, and digital economy sectors.
This phase will also make Ghana a regional financial hub by establishing an International Financial Services Centre (IFSC), as well as a regional manufacturing and logistics hub for the West Africa region; review of flagship programmes such as the 1D1F, free SHS and water and sanitation; enhance the business environment of the private sector through digitization, skills training, improvements in business regulations and their implementation, energy sector reform and expanding access to finance.