Last week the Bank of Ghana announced a raft of monetary policy measures aimed at diluting the expected – indeed inevitable – negative impacts of the global coronavirus pandemic on the Ghanaian economy and the economic fortunes of the businesses and households that operate within it. While the effectiveness of the central bank’s measures are questionable, this is only because of the very nature of the problem itself; the BoG deserves commendation for effort, no matter the eventual results.
Now however, attention is shifting to the executive arm of government itself, from whom many people are now expecting some form of fiscal stimulus to reduce the debilitating effects of the viral outbreak on business and household incomes. Such attention is intensified by news that the President Donald Trump administration in the United States wants to spend some US$850 billion on a fiscal stimulus aimed at relieving the inevitable financial pressures many Americans will suffer.
Here in Ghana, demands for some sort of fiscal relief will be intensified by the fact that this is an election year, and traditionally, Ghanaians tend to make all sorts of demands, some reasonable, others eminently unreasonable, during the run up to general elections.
The incumbent President Nana Akufo-Addo administration will expectedly find itself caught between the devil and the deep blue sea, over this issue. If it agrees to providing a fiscal stimulus, its political opponents will accuse it of fiscal indiscipline, because Ghana’s finances are not in good shape, as evidenced by the inordinate size of the public debt and the consequent debt servicing requirements. On the other hand if it refuses to provide a fiscal stimulus, for this very reason, those same political opponents will accuse it of lack of empathy with the plight of Ghanaians especially the most vunerable segments of the populace.
To be sure, this is normal politicking as far as Ghana’s political elite on both sides of the divide are concerned;’ scoring political points ahead of an election is far more important than taking a stance that best serves the interest of the state.
In this case however, government can afford to ignore the political considerations – simply put, the coronavirus outbreak has given it as close to a “free pass” with regards to its performance this year, as is possible. Any shortfalls can be blamed on the impact of the virus and will be widely accepted as such by everyone except its most avid critics.
Indeed, the viral outbreak even gives the incumbent government a plausible reason to exceed the self-imposed five percent of Gross Domestic Product fiscal deficit ceiling. The fiscal responsibility law on which it is grounded allows for exceptional situations and the coronavirus outbreak qualifies as this.
This means government has a lot of flexibility in how it goes about addressing the economic impact of the outbreak on the populace.
But it will need to proceed with extreme caution. With general elections on the horizon it would be easy to read political bias into any effort by government to provide fiscal stimulus or relief and if that does happen it could further tear Ghana’s already deeply divided polity.
This means government has hard decisions to make over the next couple of months and even the wide flexibility the well -recognized crisis situation provides, will not make those decisions any easier. If there was any time that politics should take a back seat to the national good, even with a general election just around the corner, it is now.
