COVID-19 : Ofori-Atta counts GH¢9.5bn cost to economy

  • Crude oil GH¢5.6bn
  • Non-oil tax revenue GH¢2.2bn
  • COVID-19 Alleviation Plan GH¢1bn
  • National Preparedness and Response Plan GH¢572M

Finance Minister Ken Ofori-Atta has painted a grim picture for the country’s economy following the expected impact of the coronavirus pandemic, saying revenue shortfall may be more than the Bank of Ghana’s projected 2.5 percent of GDP.

Mr. Ofori-Atta, who was speaking in parliament to brief the nation about the economic impact of the coronavirus pandemic, said the country should prepare to lose more than GH¢9.5 billion from shortfalls in revenue from crude oil exports; non-oil tax revenue; import revenue; and further spending under the National Preparedness and Response Plan and the COVID-19 Alleviation Programme (CAP) to combat the pandemic.

In the 2020 budget, revenue from crude oil was projected with a price of US$62.6 per barrel. However, with Brent crude oil prices taking a nose dive to US$22.9 as of yesterday [March 30, 2020], from US$63.2 in November 2019, government estimates to lose more than GH¢5.6 million, even if the price climb to US$30 per barrel.

Again, as an import dependent economy, a sizeable chunk of the non-tax revenues comes from imports. But with declining import volumes and values, as well as the slowdown in economic activities, the minister said, this would lead to shortfalls in both import duties and other tax revenues of more than GH¢2.2 billion (with shortfalls from imports estimated at GH¢808million).

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Then, the National Preparedness and Response Plan will further cost GH¢572 million. This plans seeks to strengthen coordination of the overall preparedness activities; strengthen capacity of regions, priority health facilities and points of entry to prevent, rapidly detect, investigate and control any COVID-19 outbreak in Ghana; and strengthen national capacity for laboratory surveillance and diagnosis.

It will further build capacity for early diagnosis, case management, contact tracing and infection prevention and control; ensure minimum health logistics are in place in prioritised regions, health facilities and points of entry for preparedness and laboratory capacity sustained for timely and quality testing of COVID-19 samples; and increase public awareness on COVID-19 risk mitigation and response measures.

There is also the GH¢1 billion COVID-19 Alleviation Programme (CAP) which was announced by the President as means to mitigate the impact of the coronavirus on businesses and households and ensure that economic activities are sustained, whiles minimizing job losses. This, Mr. Ofori-Atta said will be taken from the Stabilisation Fund and will go to targeted businesses in the health sector, education sector, hospitality industry, SMEs, and households hard hit by the Coronavirus pandemic.

Besides the aforementioned cost to the economy, other sectors that will be heavily hit by this storm include the hospitality industry, trade and commerce, agriculture, among others.

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For example, hotel occupancy rates are down from 70 percent to under 30 percent and staff are being sent home; trade volumes and values (both domestic and international) are also reducing as a result of the coronavirus pandemic. The country is already seeing significant reductions in trade volumes and values with many countries, especially China, which constitutes the highest of Ghana’s imports and the second highest of Ghana’s exports.

And agriculture’s growth could still be affected as a result of disruptions in the supply chain and lower demand activities. Disruptions could limit farmers’ access to inputs, such as seeds, fertilizers and insecticides, uncertainty and fear could negatively impact planting decisions; and also, a reduction in the volume of main agricultural exports, as a result of the general downturn in global economic activity due to the pandemic.

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