The world is at a halt as it is hit with a global disease, the novel coronavirus (Covid-19) was reported to have appeared from Wuhan in China near the end of December 2019, and has since spread across the world, affecting some 199 countries and majority of continents as of April 7, 2020. As of the second week of April 2020, Covid-19 infections had risen to about 1,446,981 cases, out of which about 308,653 people had recovered with 83,090 deaths recorded by the WHO. This is not different in the case of Ghana, as the first two Covid-19 cases were reported on the Ministry of Health covid page Ghana on 12 March 2020, and have since escalated to 313 cases, with 5 deaths, 2 moderately ill and 144 well/ responding to treatment as at the second week of April 2020. Subsequently the World Health Organization declared the disease as a pandemic in 2020 as the world awaits a vaccine to cure the virus. Pursuant to the declaration by WHO, countries have followed the Health precautions including a strict adherence to the practice of social distancing, which has led to a lockdown in some countries. The effects, invariably have slowed down economic activities.
Africa is set to record a total of US$ 270bn loss a report by the African Union discloses and a GDP growth of 3.2% for 2020 is now expected to slow to about 1.8%. This has led to an Impact on the Ghanaian economy with the government of Ghana projected GDP growth set to drop from a target of 6.8% to about 2.6% in 2020 due to covid-19. Beyond the inevitable impact of the Covid-19 on Ghana, key actions have been taking by the Government to curb the outbreak; i.e. extension of closure of all borders and partial lockdown of selected areas Greater Accra and Kumasi and Tema, is already having a toll on the economy. In Ghana, the economic impact of Covid-19 include the following, Agriculture value chain could be adversely impacted due to disruptions in global supply chain and slowdown in demand as countries adjust, Mixed impact of Covid-19 on commodity prices, as well as contraction in trade volumes, are all likely to result in net loss of revenue to Government, Hospitality industry adversely impacted due to closure of borders and general, Decline in trading volumes and values due to disruption in supply chain globally, Shortage in supply of foreign exchange market due to investor capital flight and decrease in exports could be offset by reduced demand for foreign exchange market due to decrease in imports, the net effect of which is yet to be assessed.
As part of the measures to combat the effects on the economic, countries and multi-lateral institution are putting economic measures in place to mitigate the response on the novel coronavirus. Notably, there has been cut in interest rates and provision of stimulus packages by Governments and provision of credit facilities by IMF (US$14 bn) and the World Bank (US$50 bn). Amongst the following are key measures planned to curb the economic situation are; the establishment of a Coronavirus Alleviation Programme (CAP) to facilitate economic recovery, Lowering of the cap on Ghana Stabilization Fund (GSF) from the current US$300 million to US$100 million to allow for transfer of excess funds to the CAP , Reduction in the policy rate by 150 basis points to 14% and drop in regulatory reserve requirement from 10% to 8% to increase supply of credit to private sector , Commercial banks engaged to provide syndicated facility of GHS3 bn to support key industries; to grant six-month moratorium on principal repayments for selected businesses; and to reduce interest rates by 200 basis points, also to increase credit supply to the private sector, and the controversy of amending of the Petroleum Revenue Management Act (PRMA) to allow for withdrawal from the Ghana Heritage Fund to aid in fighting Covid-19.
With Emphasis made under the law as stipulated in Article 257(6) of the Constit ution which states that (6) Every mineral in its natural state in, under or upon any land in Ghana, rivers, streams, water courses throughout Ghana, the exclusive economic zone and any area covered by the territorial sea or continental shelf is the propert y of the Republic of Ghana and shall be vested in the President on behalf of, and in trust for the people of Ghana; This clearly grounds well for petroleum resources to belong to the people and is vested in the President in trust for and on behalf of the people of Ghana. As such, all activities related to such resources must benefit the citizens of Ghana. Highlight on the Petroleum Revenue Management Act, 2011 (Act 815) enacted by Parliament in March 2011 to govern the management of petroleum revenues. The Act, at its core, defines the framework for accounting for receipts and expenditure from petroleum revenues. i.e. establishment and management of a central repository for petroleum funds, allocations and disbursement from the fund including allocation for current spending and saving, as well as transparency and accountability. Petroleum Holding Fund is disbursed in accordance with the Petroleum Revenue Management Act as follows: It is disbursed first to the national oil company to finance its operations an d then to the Consolidated Fund (Annual Budget Funding Amount) to support the national budget. Thirdly, it is disbursed to the Ghana Petroleum Funds for purposes of savings and investments, and lastly for exceptional purposes such as tax refunds. Furthermo re , The Ghana Petroleum Funds comprise the Ghana Stabilization Fund (GSF) and Ghana Heritage Fund (GHF). They are the channels through which excess petroleum revenues are deposited for savings and investments. For the focus of this article, I would focus o n the Heritage fund though the stabilization fund allows the government to draw from the Fund in times of shocks to the economy, or unanticipated shortfalls in oil revenue which necessitates that money be sourced to balance the budget will be the focus.
Clearing the need for Government mitigate the impact of Covidin to spend in order to implement a mix of fiscal and monetary to 19 on the economy are;
The future is now in this pandemic period. Government’s response to the virus was largely informed by le ssons learnt from countries earlier hit by the virus, especially in Asia and Europe. Given that countries such as Italy, Spain and USA have been reported to be severely impacted by the outbreak due to their initial slow response to the outbreak, Ghana risk s the chanc subje es of reaching 300’s in the weeks ahead. The Minister of Finance has a discretion, ct to Parliamentary approval, though , there is a Restrictions on the Ghana Heritage Fund accordance with regulations under the Petroleum Revenue Managemen in t (Amendment) Act (893) PRMA, of 2015 amended; Likewise, the Heritage Fund cannot be tapped into, or used as collateral for borrowing although Parliament can authorise at intervals of fifteen years from the commencement of the Pe troleum Revenue Management more PPEs, Act. Early steps can be taken ventilators, increasing with … in the Heritage Fund , t hus procurement of the social intervention at the affected lockdown areas argument made by the other side of gov ernment having enough resources . , despite the to beef up the health and living hood of citizens to avoid the outbreak any moment from now which very of the virus in the nation. The future of Ghanaians as we speak now severe argument made is t , as fear and panic sets in with the daily case count. hat , we are in our ninth year after the commencement o f the law, but Also Since in the long term thus a year after petroleum resources are depleted, the amounts held in both the Ghana Stabilization Fund and Ghana Heritage Fund must be consolidated into a singl e Fund known as the Ghana Petroleum Wealth Fund (GPWF) with the sole purpose of investment in a qualifying instruments which shall be reviewed every 3 years or sooner by the Minister on the advice of the Investment Advisory Committee. A decision to use the heritage fund now than to decide to use it for the purpose of investment again while our health is at stack.
Economic situation now.
Given that Ghana is an import-driven economy, Covid-19 is likely to have a significant negative impact on the country’s international trade and reserves. Hon. Ofori Atta counts Gh₵ 9.5bn cost to economy in a statement to parliament seeking for funds, knowing that If the situation continues longer than expected, the economy could suffer from significant decline in Government revenue and expenditure resulting in potential job losses. Gradually the world’s economy coming to a standstill. The United State government has released an amount of 2 trillion to set as a relief fund for citizens. And an interest rate being zero with the aim of creating jobs and rebuilding the infrastructure. Government in quest to save the economic have to bridge the gap created within this period and using the heritage fund and other revenues to curb the adverse impact on the economy during and after the covid-19. Additional borrowing and related expenses that will be incurred in this period is likely to increase the country’s debt risk. According to the Summary of Fiscal Measures and Deloitte on economic impact of covid-19 on the economy of Ghana, the unplanned increase in expenditure, particularly in the health sector, could adversely impact the fiscal deficit. Government estimates that events unfolding as a result of Covid-19, even with some mitigating measures, will result in a deficit of 6.6% of revised GDP, which is higher than the de facto fiscal rule of 5% established by the Fiscal Responsibility Law. CONCLUSION I end by calling on all the key Institutions involved in Petroleum Revenue Management, i.e., Parliament which has the responsibility for the final approval of petroleum agreements, Ministry of Finance; responsible for the overall management of the Funds and oversees transfers into, and disbursements from the Funds. Bank of Ghana (BOG); responsible for the day-to-day operational management of the Petroleum Holding Fund, the Ghana Petroleum Funds, and subsequently the Ghana Petroleum Wealth Fund under the terms of the Operations Management Agreement agreed to with the Minister of Finance, The Auditor-General; The Auditor-General is responsible for the external audits of the petroleum funds and is mandated to audit them each year, the provision for a public accountability body (PIAC), which is charged with monitoring and evaluating compliance by government and other relevant institutions in the management and use of the petroleum revenues and investments and also ensuring that the managers of the resource uphold their responsibilities in relation to the law as enshrined in the Petroleum Revenue Management Act (Act 815) as amended by Act 893 would fully accountable to the nation and most especially the Youth of the nation.
Written by: Prince Yaw Opoku,
School of Business General Secretary |Publicity Chairman- University Student Association Ghana