The UK-based Economist Intelligence Unit (EIU) has noted that the sharp plunge in global oil demand and prices will weigh heavily on productivity activity in the energy, oil and gas sectors of the country.
The British research firm added that the decline in the hydrocarbons sector will have spillover effects on the wider Ghanaian economy, by negatively affecting industrial production, infrastructure investment, and supplementary services.
It is in light of the above that Kojo Poku, an energy expert, is asking the government to put on hold some development projects that were stated in the 2020 budget statement – due to the drastic decline in the price of crude oil on the international market.
Poku projects that the decline in price will result in a revenue shortfall of about US$800million for the country, based on budget estimates for 2020. However, Mr. Kojo Poku says the government can take solace in the approved US$1billion IMF Rapid Credit Facility expected to be used to mitigate impacts of the COVID-19 pandemic on Ghana’s economy, to address some of the shortfalls.
It will be recalled that the budget target was 62 dollars per barrel; but owing to the coronavirus outbreak, as at going to press last week the barrel was about 19 dollars – and it is not hard to estimate the revenue loss occasioned by such a drop. Roughly converted, we’ll end up most likely with a US$800million deficit.
All eyes are therefore firmly fixed on the Finance Minister, Ken Ofori-Atta, coming to Parliament during the mid-year budget review and briefing anxious Ghanaians about measures put in place to make sure we meet programmes in the 2020 budget.
Thankfully, multilateral institutions like the IMF/World Bank gauged the problems outbreak of COVID-19 have brought in its wake and offered some emergency relief that can be deployed to offset revenue loss the pandemic will cause.
There is little doubt that it will be difficult for the government to do all the things set out in the budget, hence the advice by Mr. Poku. The government would have to prioritise and do some and leave some for subsequent years, should their mandate be renewed in December – barring any added problems COVID-19 might occasion during the period.
The EIU report says their view is that the economy is already heading for a contraction this year, with a real GDP decline of about 1%.