President Akufo-Addo in his seventh address to the nation on Sunday announced an end to the three-week partial lockdown imposed on some parts of the country which has elicited some mixed reactions.
Generally, there was a sense of jubilation, particularly for those who eking out a living was becoming unbearable since they had to stay locked indoors while for many, they yearned to breathe some fresh air.
On the other hand, however, some have questioned the decision by the President wondering whether it was prudent as the country is currently faced with over 1000 cases. The number of positive cases has risen remarkably to 1,042 with over 18,000 outstanding tests, and a substantial number of contact tracing yet to be undertaken.
The decision is welcoming in many respects as a prolonged lockdown of economic activity does not bode well for the country’s economic fortunes. Allowing economic activity to resume will stimulate the economy and allow it to bounce back to a growth trajectory.
The rating agency, Moody’s downgraded Ghana’s economic outlook to negative from positive yesterday due to the pandemic’s onslaught.
Moody’s says the decision to change the outlook to negative reflects the rising risks, ultimately emanating from the coronavirus outbreak to Ghana’s funding and debt service, with financing beyond immediate official creditor emergency support looking increasingly vulnerable.
In his Sunday address, the President indicated that out of the GH¢1.2 billion Coronavirus Alleviation Programme, a GH¢600 million stimulus package will be given to small and medium scale enterprises (SMEs) beginning in May.
This will obviously bring a lot of relief to businesses, particularly SMEs, as they already have problems accessing credit to expand and improve their operations. High-interest rates, collateral requirements and complicated processes impede the access of SMEs to capital.
It is recalled that on 5th April, the President announced that government, in collaboration with the National Board for Small Scale Industries (NBSSI), Business & Trade Associations and selected Commercial and Rural Banks, will roll out a soft loan scheme up to a total of GH¢600 million, which will have a one-year moratorium and two-year repayment period for micro, small and medium scale businesses.
Now that the government has decided that the time is rife to lift the partial lockdown imposed on the economy as a result of COVID-19, businesses would require a stimulus to compensate for the time and money lost as a result of the inactivity. We are pleased the President has made good his word and allotted the GH¢600 million as promised.
COVID-19’s economic damage will be surmounted
Ghana’s Finance Minister, Ken Ofori-Atta, and his South African counterpart managed to achieve a nine-month debt standstill from the World Bank for all qualifying members of the International Development Association (IDA), starting from May 1, 2020.
In the case of Ghana, this amounts to a freeze in principal and interest payments for the year, amounting to US$500 million, President Akufo-Addo stated in his address to the nation on Sunday. The President’s excitement about this feat is obvious since it creates greater fiscal space to help make the Ghanaian economy much more resilient.
For his part, Ken Ofori-Atta, the Finance Minister has expressed optimism that the Ghanaian economy will take three years to recover from the impact of the COVID-19 pandemic. Mr. Ofori-Atta has observed that the government has lost more than US$1 billion in revenue since the outbreak and that is why the IMF’s approval last week of a US$1 billion emergency loan is both timely and important.
Loss of domestic tax revenue and eroding of macroeconomic gains made over the past three years puts the country’s fiscal position in quite a quandary that is precisely why rating agency, Moody’s downgraded Ghana’s economic outlook to negative from positive.
President Akufo-Addo’s elation that last week Friday, Ken Ofori-Atta, and his South African counterpart managed to achieve a nine-month debt standstill from the World Bank for all qualifying members of the International Development Association (IDA), starting from May 1, 2020, totaling some US$44 billion for the countries of Africa is therefore well-placed.
It is this, and other reasons why the President remains hopeful that the pandemic will be defeated soon and the country can start repairing the damage that COVID-19 wrought on the economy. We are pleased that multi-lateral institutions like the World Bank and the IMF with the backing of G20 were able to ease the debt burden choking African economies, particularly with the outbreak of the novel virus.