Though the COVID-19 Alleviation and Revitalisation Enterprises Support (CARES) programme is a very good initiative, the financing model raises questions about its sustainability, hence the phases must be implemented slowly, Director of the Institute of Social, Statistics and Economic Research at the University of Ghana, Professor Peter Quartey, has said.
The GH¢100 billion CARES programme was announced by the Finance Minister Ken Ofori-Atta in parliament during his presentation of the mid-year budget. And per the structure of the programme, GH¢70 billion is expected to be funded from the private sector and the remaining from government.
But Prof. Quartey fears the pandemic’s impact on the private sector, which the Ghana Statistical Service says has resulted in reduced income to some 77.4 percent of households, will make it very difficult for the financing model to work as the sector even needs more help to survive.
“The CARES programme is a very ambitious one and I think that is what we need at this time to revive the economy through the private sector. However, the sustainability of the funding arrangement is what I am not too sure about. Given that 70 percent of the funding will come from the private sector which is already struggling because of the impact of the virus, it might be a bit of challenge. I am not sure that target can be achieved,” he said in an interview with the B&FT.
He further suggested that government should take the programme slowly in commensurate with whatever money it realises from the private sector rather than a full implementation which may stall at some point due to lack of funds.
“So yes, government can raise some funds from the private sector, but the 70 percent will be an uphill task. Government can prioritise the programme so that as and when the money comes, it rolls out part of the projects. A big bang approach will not be feasible,” he said.
Prof. Quartey is not the only one expressing concern about the financing model of the well-intentioned CARES programme. Auditing giant Deloitte has also raised questions, stating, the programme has the likelihood of increasing the debt stock if the private sector is unable to finance it by 70 percent.
“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 stated in its post mid-year budget review report.
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.
