As the number of confirmed cases of coronavirus infection grows by the day in Ghana resulting in a far higher and faster growing number of requisite quarantines, the question is no longer whether the country needs to be locked down, but rather it has become whether the economic effects on most Ghanaians would not be worse than the health dangers presented by the virus itself.
Simply put, Ghana lacks the financial resources to provide an economic safety net for the millions of Ghanaians who would not be able to cope with a full fledged lock down enforced by government and this is the only thing now staying the hand of the country’s leadership against declaring one.
However, without a lock down, the spread of the virus will over-stretch Ghana’s ill-prepared public health system long before the virus burns itself out, as optimistically expected by most medical experts.
Either way, government is going to need far more resources than it currently has. Indeed, public policy analysts who agreed with the International Monetary Fund’s call for Ghana to stay within its Extended Credit Facility longer, in order to build fiscal and foreign reserve buffers against possible future shocks now seem to be justified – Ghana has already applied for a new IMF facility to combat the coronavirus outbreak, less than a year after leaving the ECF.
However, in defence of government, the current situation was entirely unforeseeable; no economic projections, based on normal parameters could have foreseen Ghana’s current dilemma, even forecasts that assumed global commodity price crashes affecting gold, cocoa and crude oil at the same time.
Indeed it is the deeply extraordinary nature of the coronavirus outbreak and its effects, that is making this newspaper to argue that extraordinary measures be adopted to combat the effects.
Specifically, we are calling for a suspension of the self-imposed five percent ceiling on the annual fiscal deficit in 2020. Afterall, the Fiscal Responsibility Act that sets the ceiling also makes allowance for it to be exceeded in extraordinary circumstances. Surely, the ongoing viral outbreak is the most extraordinary circumstance conceivable.
If Ghana is willing to put the fiscal deficit ceiling aside, there are plenty of potential creditors who would be willing to step up their lending to Ghana. All of our Eurobond issuances have been several times oversubscribed and since the cedi’s exchange rate stabilized, there has been excess capacity for attracting portfolio investment into the country’s sovereign medium and long term domestic debt securities as well.
Of course, taking on more debt would further increase Ghana’s debt servicing obligations too, and these are already inordinately high which is largely why the cap on the fiscal deficit was imposed in the first place.
However, any extra debt taken on because of the viral out break has the potential to reduce the slowdown in Ghana’s economic growth rate – and the hits on labour productivity, incomes and consequent living standards – far more than the increase in debt servicing obligations. In short, properly spent, it would be money worth borrowing.
In these most unusual times flexibility is needed, and this should start with the size of the fiscal deficit.
Discussion about this post