There is one certainty in this uncertain time; no country will come out unscathed by the coronavirus pandemic. The virus has placed a mandatory injunction on human activities, virtually slumping a brake on the world economy. The two devastating prongs of covid-19 —first a toll on countries health systems, followed by an economic malaise. You can’t escape both.
Recording her first two cases in March, Ghana has been busy in her economic laboratory to come out with measures to contain the spread of the virus and slow down the impact on the economy.
Firing the fiscal bazooka
Fiscal policies are dominating economies in the wake of the pandemic. For one reason, fiscal policies can be more targeted. It has the potential of reaching areas in an economy that needs support. For example, providing food for the most vulnerable people in Ghana during the partial lockdown. With funding from the contingency reserve, the GHc1 billion Coronavirus Alleviation Programme (CAP) has been created to facilitate economic recovery. There is also the proposed GHc600 million soft loan scheme for Small and Medium scale business. Other supporting fiscal interventions include the absorbing of 3 moths of water bills for all Ghanaians, subsidising electricity bills. Expenditures are rising to save lives and protect livelihoods.
Even though government is providing unprecedented support to households and firms and while this support remains crucial in our efforts, there is, however, substantial uncertainty of their impact on the economy now and post-coronavirus period. The reason for the uncertainty is not far-fetched, humans are not like chemicals in a science laboratory, they change and are unpredictable, most of the time. It is for this reason that a household which is prudent in managing its consumption of water, will suddenly change to “mismanaging water” upon hearing the new intervention.
Let’s talk about the old dangerous “chemical” in the economic laboratory—debt— which is going nowhere. Only that it’s no longer scary. At least for now. The country secured a $100 million support from the World Bank in tackling the covid-19 pandemic. Well, it’s a concessionary loan with little servicing cost—we are told—but the principal repayment lies ahead of us. We will pay. There is also the $1 billion disbursement from the IMF to be drawn under the Rapid Credit Facility. Interestingly, the times in which we are have suppressed the usual concerns of adding to the national debt stock. We are grateful to add on. Lives over economic indicators.
It seems like monetary policy has been talked of only a little in this pandemic. This is partly because, even in normal times it takes a year or more for monetary policy to have its maximum impact on an economy. We are not even in normal times. However, monetary policy has been following fiscal policy. The Bank of Ghana in helping slow the impact of the virus on the economy has implemented some measures. Interest rate has been cut to an 8-year low from 16% to 14.5%, minimum reserve requirements have been lowered from 10% to 8%. We haven’t gone to the extreme case of monetary financing—printing money to support the government.
Searching for an exit strategy
The president’s announcement to lift the restriction on movement in the two epicenters of the virus was met with various reactions. Suddenly Ghanaians had plans and strategies to exit the partial lockdown. Ideas for exiting the imposed restriction begun spreading faster than the virus itself. On one side, there was the argument of the President placing the economy ahead of human lives—lockdown lifted too early. It was obvious the toll the restriction was inflicting on persons and businesses. Worrying concerns of businesses not being able to meet their obligations, the scare of laying-off staff and a recession became more visible. Yes, the President said they know how to bring the economy back to life. But there is no magic wand in achieving this. The journey out of a recession is a long and tiring process. You better don’t get to the bottom of the recession valley.
Others saw the need to extend the lockdown. With 1,042 cases, the ordinary Ghanaian was more worried and expected an extension of the partial lockdown. Why should we lockdown at 141 cases and lift the lockdown when we have 1,042 cases? These were legitimate questions on the face of the numbers. But again, it was time to let the experts lead and follow the science.
Around the globe, countries are more or less doing a trial-and-error with easing of lockdowns. Denmark started by opening grade schools and day care centres. Angela Merkels Germany, a blue-eyed-boy in this pandemic has eased the lockdown on small shops and car dealers. Evidently, exiting a lockdown is an experiment based on your own economy. No measures or conditions are cast-in-stone to work effectively.
As always, and as urged by the President, Ghanaians will be citizens and not spectators. We’ll make our opinions heard. The leadership must keep their cool and do the right thing in the economics laboratory.
No policy is far off from the trials
We are in times where saving lives and livelihoods comes first. All others are secondary. As we search for measures to help revive the economy, no policy option should be written-off in the laboratory. Every mooted policy should be considered in its own merit. Quite a number of policies have been proffered when the virus hit us in March. Some couldn’t even stand the social media litmus test. Others set foot in the jubilee house, but were shot down with the short political pistol. It is important that the leaders of the country will carefully consider suggested policy options and fine-tune them to suit our situation. Because in this trial one is not confident about the policies which may be our royal route to sustaining the economy.
There is even less benefit in trying to replicate what others are doing. Every country economy is different. And so, must be policy decisions in the fight against the virus. The information churned out by international organizations and other countries experiences should only be guides for our own home-grown coronavirus policies and measures.
Until a vaccine is found, the trials will continue. When you criticise a measure or an intervention, just remember your opinion is another set of trial. It may or may not work. Thankfully, politicians are becoming scientists, let’s hope the scientists don’t become politicians.