Professor Newman Kwadwo Kusi’s thoughts … Closing the COVID-19 pandemic fiscal gap

  1. Fiscal Gap Created by the COVID-19 Pandemic

In his fourth address to update Ghanaians on the country’s responses to the Coronavirus pandemic the President directed the Finance Minister to prepare for approval by Parliament, a Coronavirus Alleviation Program (CAP) to address the disruption of economic activities, hardship of the people and to rescue and revitalize our industries. A preliminary analysis undertaken by the Ministry of Finance shows that the coronavirus pandemic will result in significant shortfall in tax and non-tax revenues, increased health-related expenditures and tight financing conditions.

According to the Minister of Finance, the estimated fiscal impact from the revenue shortfalls, the cost of the preparedness plan, and the cost of Coronavirus Alleviation Program (CAP) is GHȼ9.5 billion.

A recalibration of the 2020 fiscal framework for the approved 2020 Budget to reflect the fiscal impact of the pandemic, without incorporating measures, shows that the overall fiscal deficit will increase from the programmed GHȼ18.9 billion (4.7% of GDP) to GHȼ30.2 billion (7.8% of GDP). The primary balance will correspondingly drop from a surplus of GHȻ2.8 billion (0.7% of GDP) to a deficit of GHȻ5.6 billion (1.4% of GDP). Measures were therefore required to close the projected fiscal gap of GHȼ11.3 billion (3.1% of GDP) caused by the pandemic.

  1. Closing the 2020 Fiscal Gap

Provisional data for the first quarter of the year shows a widening of the fiscal deficit to 3.4% of GDP compared to a deficit target of 1.9% of GDP. The larger deficit is explained by shortfalls in tax revenues and higher pace of spending, including some unbudgeted COVID-19 related expenditure. The government therefore estimates that it will require an additional GHȻ14.9 billion, equivalent to 4.1% of GDP in 2020 to close the fiscal gap resulting from the COVID-19 shock, bringing the total fiscal gap for the year to GHȻ33.8 billion (8.8% of GDP).

As was planned, financing the original GHȻ18.9 billion fiscal deficit was to come from both domestic and foreign sources. Planned domestic financing amounted to GHȻ8.2 billion (2% of GDP) while foreign financing was set at GHȻ10.6 billion (2.7% of GDP). The foreign financing included a plan to raise US$3 billion from the international capital market, of which US$2 billion was to be used to help close 2020 budget deficit and the rest for domestic debt liability management. The GHȻ14.9 billion additional amount required to close the COVID-19 related fiscal gap is also planned to be raised from both domestic and foreign sources.

Domestic Financing. As at end-May 2020, a total of GHȻ12.6 billion has been mobilized from the country to help close the fiscal gap (Table 1). This includes the following:

  1. Withdrawal of GHȻ1.26 billion (US$219 million) from the Stabilization Fund;
  2. Cash donation of GHȻ59.8 million by the private sector (banks, companies, organizations, associations, churches, etc.);
  • Bank of Ghana donation of GHȻ10 million to the CAP Fund; GHȻ25 million support to Government to cater for 400,000 vulnerable people; GHȻ1.29 billion deferment of interest payments on non-marketable instruments to 2020; and GHȻ10 billion Emergency Financing program.

Table 1. Domestic Financing of the COVID-19 Fiscal Gap (GHȻ’ million)

Source Amount


i) Cash donations by over 100 organizations, banks, companies, associations,     churches, etc.

ii) Withdrawal from Stabilization Fund

iii)  Bank of Ghana (BoG)

Donation to CAP Fund

Support to Government to cater for 400,000 vulnerable people

Deferment of interest payments on non-marketable instruments to 2020

Emergency Financing Provision

Total Domestic Financing










See Annexures 1

Foreign Financing. Significant financial support has also been received from Ghana’s development partners. As at 15 May 2020, the World Bank and the IMF have provided a total of GHȻ9.2 billion (US$1.6 billion) credit facilities to help close Ghana’s COVID-19 fiscal gap (Table 2). The World Bank provided US$100 million to assist Ghana in tackling the crisis. This financing package includes US$35 million in emergency support to help the country provide improved response systems and a US$65 million contingency emergency response. The Bank also granted Ghana a freeze on a US$500-million debt and interest repayment for the rest of 2020.

On April 13, 2020, the IMF Executive Board approved the disbursement of US$1 billion (SDR738 million) Rapid Credit Facility to help close Ghana’s immediate balance of payments and fiscal financing needs resulting from the COVID-19 shock. The loan has a grace period of 5½ years, a repayment period of 4½ years, a maturity period of 10 years, and zero interest rate. Ghana will also benefit from the African Development Bank Group’s US$10 billion COVID-19 Response Facility to assist regional member countries in fighting the pandemic. .

Table 2. Foreign Financing of the COVID-19 Fiscal Gap (US$’ million)

Source Amount


i) World Bank

Emergency Support and Contingency Emergency Response

Freeze on repayment of US$500 million debt and interest for the rest of 2020


ii) IMF: Rapid Credit Facility


Total Foreign Financing









Other Contributions. In addition to the financial support secured from the country to help close the COVID-19 fiscal gap, the BoG has reduced the policy rate from 16% to 14.5%; primary reserve requirement from 10% to 8%; and capital conservation buffer from 3% to 1.5%. Together, these adjustments will free some GHȻ3.6 billion into the banking system to be given out as loans to support local businesses in the fight against the COVID-19 pandemic.

Ghanaian companies, banks, industries, churches, associations, banks, foreign residents, etc. have also donated over GHȻ30 million worth of nose masks, sanitary items, personal protective equipment, medical equipment, building materials, ventilators, food items and vehicles to the Ministry of Health and various government hospitals across the country. Free insurance cover worth over GHȻ28 million has also been secured for 2,000 frontline workers in the Ghana Health Service by the Enterprises Trustees (see Annexure 2).

The Master Card Foundation, together with commercial banks in the country have also activated GHȻ4.9 billion in the form of loans to support SMMEs and the pharmaceutical industry. Effia-Nkwanta Hospital has received Euros13.4 million support from the German Government to help deal with the pandemic while Noguchi Memorial Research Institute has received GHȻ300,000 donation from Enterprise Trustees and Consolidated Bank Ghana to support its work.

  1. Issues Arising

 It is generally agreed that in the presence of the COVID-19 pandemic, lives must be put above resources and health above debt. Ghana, as a developing economy, is among the most vulnerable at this time. The Ghanaian economy, despite years of good progress, remain extremely fragile and ill-equipped to deal with this pandemic successfully with its own resources. The collapse of oil prices on the world market has also contributed to the country’s financial distress. Ghana will simply not able to meet its budget as planned under pre-coronavirus oil price benchmarks. Government must therefore go the extra mile and provide the country with the much-needed and urgent financial relief.

First, the Government needs a total of GHȻ33.8 billion to close the new 2020 fiscal gap. As Tables 1 and 2 show, by mid-May 2020, total financing available to the Government from both  domestic and foreign sources amounted to GHȻ21.7 billion, comprising GHȻ12.6 billion from domestic sources and GHȻ9.1 billion (US$1.6 Billion) from foreign sources, leaving GHȻ12.2 billion deficit to be closed. The question that arises is, how does the Government intends to close this gap?

Second, on May 15, 2020, and in line with section 30 of the BoG Act, 2002 (Act 612) as amended, BoG triggered the Emergency Financing Provisions which allows the Bank to increase the limit of its purchases of government securities in the event of any emergency to help finance the residual financing gap. Under this Asset Purchase Program, BoG purchased a Government of Ghana COVID-19 relief bond with a face value of GH¢5.5 billion at the monetary policy rate of 14.5% with a 10-year tenor and a moratorium of two years for both the principal and interest. The Bank also indicated that it stands ready to continue with the Asset Purchase Program up to GH¢10 billion in line with the current estimates of the financing gap from the COVID-19 pandemic.

This raising of the GHȻ10 billion emergency financing by the BoG for the Government raises a number of questions. Section 30 (6) of the BoG Act, 2002 (Act 612) as amended states as follows: “In the event of any emergency, the Governor, the Minister and the Controller and Accountant-General shall meet to decide the limit of borrowing that should be made by  Government and the Minister shall submit a report on the issue to Parliament within seven sitting days”.

  • Who declares “a state of emergency” in the country? Governor of BoG, Minister of Finance, Government or Parliament?
  • What happens when “a state of emergency” is declared?
  • Did the Governor, the Minister of Finance and the Controller and Accountant General meet to decide on the GHȻ10 billion emergency financing for the Government?
  • How was the figure GHȻ10 billion determined? Was it based on any program of the Government?
  • Did the GHȻ10 billion emergency financing received parliamentary approval?

Third, despite the recent debt management strategies by the Ministry of Finance, the World Bank and IMF have maintained Ghana as a high-risk of debt distress country. Early this year, a report prepared by the Economic Commission for Africa (ECA) also named Ghana as the 8th country in Africa facing a high risk of debt distress. This indicates that Ghana is accumulating so much debt that it may not be able to repay and this was captured in the latest Debt Sustainability Analysis (DSA) released by the World Bank and IMF.

The IMF approved a US$1 billion rapid credit facility, the highest granted to an African country so far, to aid Ghana fight the effects of the pandemic. Before then, the country’s debt level was threatening the already fragile socio-economic situation. Ghana’s debt stood at GHC236.1 billion (59.3% of GDP) as at end March 2020, according to the May issue of the Summary of Economic and Financial data released by the Bank of Ghana. This implies that in a period of three years and three months the current Government has added GHc113.5 billion to Ghana’s debt stock.

The impact of Ghana’s rising public debt is most strongly felt on the country’s debt servicing bill. According to the 2020 Budget, Government planned to set aside GHc21.7 billion just to pay interest on public debt. This is in addition to the GHȻ44.1 billion paid as interest on public debt in the three-year period of 2017-2019. While the rebased nominal GDP significantly improved the public debt to-GDP ratios (albeit remaining elevated), the debt service ratios continue to breach their respective thresholds under the baseline, reflecting the underlying vulnerabilities. This development warrants drastic actions to contain the situation. The closing of the fiscal impact of the COVID-19 pandemic should not be used as an excuse to over-bloat the country’s debt.

  1. Conclusion

While borrowing to support the alleviation of the COVID-19 crisis is not an issue, the fact of the matter is that Government has taken too many loans in recent years with very little to show in terms of significant development projects. There is therefore a critical need for the Government to ensure that monies borrowed by it and/or donated to support the fight against the COVID-19 pandemic are put to efficient and effective use.

Government has to put the interest of the country first and resist the temptations of unplanned public spending and shifting expenditure off-budget, which tend to exert pressure on the economy. The need to ensure that financial resources directed toward pandemic recovery are managed in a transparent process and are also accessible to those who need them, irrespective of political affiliation, is what is required. The pandemic does not give the Government the power to disregard the public financial management rules and regulations.

Ghanaians will therefore demand greater accountability and transparency of the management of the fiscal impact of the COVID-19 pandemic. The intention is to establish that funds made available from foreign donors to the country or from the BoG, local organizations, businesses and individuals, etc. to the government are fully and efficiently utilized for the intended purposes only. Such transparency will foster better-informed public debate and promote greater government accountability and credibility. In this light, Ghanaians expect all COVID-19-related programs, their justifications, expenditures and financing to be properly kept for the purposes of accountability and transparency.


No. Contributor Amount
1 President – 3 months’ salary 87,000
2 President Akufo-Addo (from individuals & institutions) 8,750,000
3 Speaker of Parliament 50% salary for 3 months
4 Vice President 3 months’ salary
5 Ministers and top appointees at the Presidency 50% salary for 3 months
6 Parliament 200,000
7 Absa Bank 1,000,000
8 Acadia Industries Ltd 25,000
9 Agricultural Development Bank 200,000
10 Africa World Airlines 100,000
11 Anglican Church of Ghana 60,000
12 Association of Ghana Industries 500,000
13 Association of Bankers 10,000,000
14 Alliance for a Green Revolution 10,000
15 Amponsah Effah Pharmaceuticals Ltd 50,000
16 Asogli 100,000
17 Betonsa 100,000
18 Betway 150,000
19 Cal Bank 200,000
20 Care International (Ghana) 50,000
21 Cenpower 200,000
22 Chartered Insurance institute of Ghana (CIIG) 50,000
23 Chartered Institute of Marketing 40,000
24 Chamber of Mines 11,500,000
25 Consolidated Bank Ghana 200,000
26 Commercial Quarry Operators Association of Ghana 10,000
27 Customs Brokers Association 10,000
28 Diamond Cement Group 100,000
29 Dannex Ayrton Starwin 50,000
30 Deeper Life Bible Church 20,000
31 Dr. Armed Vanderpujie 20,000
32 East Cantonment Pharmacy 100,000
33 Eckankar Ghana Satsang Society 10,000
34 ECOWAS Bank for Investment and Development 250,000
35 EDC 100,000
36 Ghana Association of Forex Bureau 50,000
37 Ghana Catholic Bishops 12,200
38 Ghana Cocoa Board 200,000
39 Ghana Commercial Bank 100,000
40 Ghana Muslim Community 130,000
41 Ghana national Association of Small Scale Miners 50,000
42 Ghana National Association of Private Schools 50,000
43 Ghana National Chamber 0f Commerce and Industry 100,000
 44 Ghana National Bureau- Ecowas Brown Card Insurance Scheme 100,000
45 Ghana Insurance College 50,000
46 Ghana Reinsurance Organization 100,000
47 Ghana Insurers Association 500,000
48 Ghana Insurance Industry 1,105,000
49 Ghana Friendship Association of Edmonton in Canada 20,000
50 Goldfields 2,000,000
51 Government Boards Chairpersons of State Entities 200,000
52 Graduate Impresarios Association 1,500
53 Grand Lodge of Ghana 100,000
54 Holland Ghana 100,000
55 ICGC 100,000
56 Indian High Commissioner 375,000
57 Indomie Ghana 1,000,000
58 Institute of Directors-Ghana 33,000
59 Institute of Internal Auditors 10,000
60 Insurance Brookers Association of Ghana 200,000
61 Interplast 1,200,000
62 Justmoh Construction Limited 500,000
63 Karpowership Ghana 300,000
64 Lebanese Community 2,150,000
65 Majority Caucus in Parliament 100,000
66 Maranatha Oil Services Ltd 100,000
67 Methodist Church 100,000
68 Mobile Phone and Accessories Dealers Association 100,000
69 Mondelelez Int. and ABANTU for Development 216,000
70 Multivet Ghana Limited 25,000
71 National Association of Liquefied Petroleum 60,000
72 National Food Buffer Stock Company 100,000
73 National Insurance Commission 200,000
74 National Investment Bank 185,000
75 National Lottery Authority (NLA) 200,000
76 New Patriotic Party (NPP) USA Wing 50,000
77 NHIS 250,000
78 Plan International 50,000
79 Petroleum Commission 1,000,000
80 Prefos Limited 150,000
81 Promasidor Ghana 300,000
82 Rocksure International 50,000
83 Republic Bank Holdings 200,000
84 Saham Group 100,000
85 Salvation Army Church in Ghana 70,000
86 Social Needs Foundation of GUOOF 25,000
87 Societe’ Generale 500,000
88 SSNIT 500,000
89 Staff of Min. of Foreign Affairs and Regional Integration
90 Stallion Group 35,000
91 Total Petroleum Ghana Ltd 100,000
92 Turkish Aksa Energy 2,500,000
93 Volta River Authority 2,000,000
94 Vitol 318,000
95 We 2 Seafood Company 300,000
96 West African Insurance Companies Association 5,000
97 Willmar Africa 100,000
98 Women International Shipping and Trading 10,000
99 Yara Ghana Ltd 200,000
100 Yoruba Council of Chiefs in Ghana 20,000
101 Zenith Bank 1,000,000
Total 55,560,500 737,200
Cedi equivalent of dollar contribution 4,231,528  
Grand Total 59,792,028  


Annexure2. Support to businesses and hospitality industries, hospitals, health care centres

Contributor Type of Contribution


1 Accra Brewery Ltd. and Akosombo Textiles Industry Company 15,000 nose masks to Ministries of Tourism, Creative Arts and Culture, and Ministry of Trade and Industries
2 Abosso Goldfields Ltd (AGL) GHȻ621,000 worth of personal protective equipment for Huni-valley Municipality
3 Abura Asebu Kwamankese Teachers Credit Union Sanitary items – 700 nose masks, 30 gallons of liquid soap, 30 gallons of disinfectants, 30 gallons of hand sanitizers, hand towels, veronica buckets – to three health facilities in the Abura Asebu Kwamankese District in the Central Region.
4 Allianz Life GHȻ8.44 million life insurance cover for 112 medical doctors and 620 nurses  in three health institutions
5 AngloGold Ashanti Malaria Control Limited US$300,000 through donations, disinfection and community education in the Upper West and Upper east regions
6 Auto Parts Ltd (APL Nissan) Nissan NP300 Hard-body Pic-Up Truck worth GHȻ144,000
7 Bank of Ghana Actions free GHȻ3.6 billion into the banking system – policy rate reduced from 16% to 14.5%; primary reserve requirement from 10% to 8%; and capital conservation buffer from 3% to 1.5%
8 Commercial Banks Agreed with Min. of Finance and BoG to raise GHȻ3 billion by way of loans to support the hospitality industry
9 Church of Pentecost and Tobinco Pharmaceuticals GHȻ45,000 worth of personal protective logistics
10 Chamber of Mines GHȻ11.5 million to the MoH for the procurement essential equipment
11 Consolidated Bank, Ghana GHȻ200,000 to Noguchi memorial Hospital for Medical Research

GHȻ1,000,000 committed in the form of loans to support the fight against the pandemic

12 Diamond Cement 250 tons of cement worth GHȻ250,000 for rehabilitation of isolation centers
13 De-Colony Foundation Food items for over 300 vulnerable persons with disabilities in the Ketu South Municipality
14 Enterprises Trustees Free life insurance cover up to GHȻ20 million for 2000 frontline health workers in the Ghana Health Service


GHȻ100,000 donation to Noguchi Memorial Institute for Medical Research (NMIMR)


Support 350,000 scheme members on its Master Trust Tier 2 & 3 facing various levels of risk to COVID-19. This include:

·         3 months pension contribution if retrenched;

·         Free life cover for COVID-19 cases

·         Employee well-being assistance program for retrenched/stressed employees

15 Former President John D. Mahama Food items to 20,000 households in Accra, Kumasi, Koluedor and Borteiman
16 German Government Euros13.4 million to support Effia Nkwanta Hospital
17 Liaison Group – Forestry C’mission, EPA, Min. of lands and Natural Resources, Mineral’s C’mission, Forestry Services, Water Resources C’mission, Chamber of Mines, and Geological Survey Authority Six hospitals in mining communities  – New Abirem, Sefwi Wiawso, Bibiani, Buipe, Obuasi, and Wassa Akropong – each received GH₵30,000 as well as 25 scrubs; 20 nose masks; 10 infrared thermometers and five gowns.
18 Global Fund Personal protective equipment and food packages to about 9,000 beneficiaries
19 Mac Ghana 10 chevrolet cobalt saloon cars
20 Maersk N95 masks, surgical masks, disinfectants, sanitizers, etc. to Tema general Hospital and Ghana Police Service
21 MasterCard Foundation GHȻ90,000,000 facility to support SMMES
22 MTN Foundation GHȻ5,000,000 worth of medical supplies
23 Newmont Ghana GHȻ166,000 worth of medical supplies to New Abirem Government Hospital and the Birem Central Municipal Health Directorate
24  Peewood, Tema Bonded Terminal 10 ventilators worth GHȻ350,000 to Government to fight COVID-19
25 Pharmanova Medical equipment and drugs valued GHȻ102,045 to Komfo Anokye Teaching Hospital, Kumasi
26 Prefos Limited PPEs worth GHȻ100,000
27 Poly Tank (Mohinani Group) 10 pieces of 10,000 litre poly tanks
28 Sandvik Mining and Construction, Ghana Limited GHȻ150,000 worth of personal protective equipment to the Ashanti Regional Health Directorate
29 Sol Cement GHȻ35,00 Worth of filter respiratory face masks to Customs at KIA
30 Stanchart Bank, Ghana PCR  equipment, N95 masks, surgical glasses and disposable ovals to Kumasi Center for Collaborative Research and Korlebu Child health Dept.
31 Tiger Force Group GHȻ30,000 worth of items – 1000 KV 95 nose masks, surgical masks, mobile phones
32 Willmar Africa GHȻ900,000 worth of goods – rice, vegetable oil, etc.


>>>The writer is the Executive Director, Institute for Fiscal Studies, Ghana

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