Along with many other countries, the government of Ghana announced a lockdown of the economic hubs of the country as part of its measures to contain the COVID-19 pandemic. In expressing the government’s commitment to containing the pandemic, the President declared, “we know how to bring the economy back to life. What we do not know is how to bring people back to life”. Within three weeks, however, the government has unexpectedly lifted the lockdown.
Ghana is one of the first few countries to lift restrictions on movement following the COVID-19 pandemic, taking many observers by surprise. Many health professionals and academics have questioned its rationale. At first glance, it appears the government has reneged on its initial commitment to contain the pandemic at all cost. However, a careful reading of the Ghanaian economic fundamentals and the global economic trends, suggests the decision is a calculated attempt to protect livelihoods and limit the economic aftermaths of the pandemic.
Ghana responds with a partial lockdown
As of 1 May 2020, COVID-19 has spread to 187 countries with over three million confirmed cases and over 230,000 reported deaths. Ghana, like the rest of the world, has responded with policy measures to stem the spread of the virus and to ensure her fragile health facilities are not overwhelmed. The lockdown of the two largest cities and their adjoining towns is perhaps the most unprecedented policy measure the government has taken so far to contain the spread of the virus.
Unprecedented as it was, the lockdown did receive applauds from far and near. In a tweet, the Director-General of the World Health Organisation described the President’s remarks announcing the lockdown as “a powerful message to the world”. In a rare show of support, leaders of the various political parties met to praise the government’s handling of the pandemic. All seemed to be on track. The police, the military, and other security personnel were at hand enforcing the lockdown. To a very large extent, the general public was adhering to the lockdown directives. The streets were quieter, non-essentials shops were closed, and nightlife was virtually non-existent. The usual mass movement and gatherings during the Easter period was absent.
And then the President dropped the curveball
Now unexpectedly, the government has lifted the three-week lockdown. What intrigues many is that the lockdown was lifted at a time when the rate of confirmed cases had not plateaued. On the contrary, the number of confirmed cases has been rising at an increasing rate (Figure 1). Moreover, the virus has begun spreading to the other regions of the country.
Figure 1: COVID-19 cases in Ghana
Updated: 25th April, 2020, 9:00 GMT
Indeed, health experts and professionals such as Professor Agyeman Badu Akosa, the former Director-General of the Ghana Health Service, were expecting an extension of the lockdown to the entire country. Others such as Dr. Abekah-Nkrumah, a Health Economist at the University of Ghana, went further to warn that lifting lockdown would cause more harm than good.
Why then did government throw the curveball?
There are at list three broad factors that inform the government’s decision to lift the lockdown.
- Increased capacity to contain and manage the pandemic
At the onset of the pandemic, Ghana struggled to acquire personal protective equipment and medicines to manage COVID-19 cases. The government has since increased its capacity to produce these locally, according to the President in his address to the nation on 19 April 2020.
Similarly, when the first COVID-19 case was reported in the country, the Noguchi Memorial Institute for Medical Research was the only facility capable of testing in Ghana. Since then, testing capabilities have been ramped up across the country. In addition, several dedicated COVID-19 treatment centres have been set up, with the aim of having at least one centre in each of the 16 regions in the country.
The government has also stepped up the capacity to trace people who have come into contact with infected persons. As Figure 2 shows, Ghana is currently administering more tests per head than any other country in Africa. Overall, the case management regime seems to be holding up remarkably well, with relatively low critical and death cases. The increased capacity has therefore significantly reduced the risk of an overwhelmed health sector.
Figure 2: COVID-19 test rate in Africa
- Lockdown pushing many into extreme poverty and hunger
The second factor that swayed the government to lift the lockdown was the severe impact on livelihoods of a large segment of Ghanaians. The exact numbers are patchy. However, the structure of the Ghanaian economy and the emerging anecdotal evidence suggest the lockdown was imposing severe hardships on vulnerable households across the country.
For instance, as in other countries, many Ghanaians are losing their jobs because of the pandemic. Unlike other countries, however, there are no unemployment benefit schemes in Ghana. As a result, those who lost their jobs had to find alternative means to fend for their families until normalcy returned.
Worse still, 86% of Ghanaian workers operate in the informal sector. These informal workers need to have a day out in the market, otherwise, they cannot put food on the table. For these workers and their dependants, an extension of the lockdown would have pushed them further into extreme poverty and hunger. As one petty trader recently lamented “I have kids. If I do not go out, my children will die of hunger. I would rather they die of the coronavirus than hunger”.
The President bluntly put that it was impossible for the government to “… ignore the impact this lockdown is having on several constituencies of our nation, especially the informal workers who need to have a day out in the market to provide for their families.”
- Global economy deteriorated faster and deeper than expected.
Perhaps, more telling is the fact that the government initially underestimated the magnitude the global economic slowdown and the subsequent fiscal implications for the Ghanaian economy. In its statement to Parliament on 30 March 2020, the government set out the predicted economic impact of the COVID-19 pandemic on the Ghanaian economy. The government expected a total revenue shortfall to the tune of GHȼ7.93 billion, 2.1% of GDP (Figure 3).
Further, the government committed GH¢572 million to fight the pandemic, and set up a GHȼ1 billion Coronavirus Alleviation Programme (CAP) to mitigate the impact of COVID-19 on businesses and households. Put together, the total fiscal impact of the pandemic was estimated at GHȼ9.51 billion, equivalent to 2.5% of GDP.
Figure 3: Large but underestimated impact of COVID-19 on the Ghanaian economy
This turned out to be a gross underestimation of the immediate fiscal fallout of the pandemic. The oil price and the global economic growth rate that informed the government’s projections deteriorated further and faster than envisaged. For example, the government had assumed an average oil price of $30 per barrel. Since then, oil prices have been trending downwards. As of 28 April, the Brent crude and WTI crude oil prices are $18.84 and $10.27 per barrel respectively, and there is no indication that they will recover anytime soon. Moreover, the global economic growth rate has plummeted from 2.9% in January to -3%.
Concluding remarks: Flexibility is important
The government of Ghana did surprise many by lifting the partial lockdown of the economy. The verdict is still out as to whether the government has struck the right balance between saving lives and protecting livelihood. That said, the COVID-19 pandemic is a crisis like no other. There are no perfect playbooks. What is needed is an agile and responsive government, willing and able to monitor and revise its policy instruments as the crisis unfolds. On that score, the government of Ghana seems to strike the right cord.
The writer is the Country Economist International Growth Centre
email: [email protected]
Disclaimer: The views expressed in this post are those of the author based on his experience and on prior research and do not necessarily reflect the views of the IGC.