Ghana faces threat of severe economic and debt crisis after coronavirus

Like many African countries experiencing the devastation of the coronavirus, Ghana’s economy is in total crisis and the pandemic is not helping to mitigate the problem of public debt.

It is very easy to refer to Africa as the continent for many diseases, but the reality is that apart from malaria, God only knows the truth about the origin of other diseases that continue to affect the continent’s political and economical infrastructures.

Africa is not responsible for many diseases, including the coronavirus but during every pandemic, it affects the continent most since its countries are developing. The coronavirus pandemic has exacerbated the problem of public debt in many African countries, including Ghana, Cameroun, Angola and Kenya.

African countries are in the most vulnerable position, with up to 30% of their budget currently spent on servicing their debt and accordingly, the debt crisis in sub-Saharan countries could cause a serious social crisis caused by a drop in the income of the population.

Anytime Africa recovers or recovering from a pandemic towards developments, then comes another pandemic. After a long devastation of HIV Aids, the continent was still struggling to maintain a stable economy, when in 2014 it was struck by the Ebola.

Even though the hemorrhagic has fever hit some a few African countries, including Congo, Sierra Leone, Liberia, Guinea, etc, the impact affects the entire continent economically and politically.

Despite the large amount of loans taken from foreign governments and the vast amount of resources that only benefit foreign countries, African countries, including Ghana, are finding it very tough to combat the disease.

A few months ago, Africa was called the "continent of the future." However, the consequences that it will face after the end of the pandemic will be quite acute due to the restrictions that have been set by both partner countries and the African states themselves to combat the virus.

In fact, we will observe the first economic recession of the entire continent in the last 25 years, writes Natalia Piskunova, Ph.D. in Political Science, Associate Professor at Moscow State University. Lomonosov (Department of World Politics)

The African continent, which over the past century has repeatedly become the victim of severe epidemics that have killed tens of millions of Africans, including children, is out of the focus of global attention due to the coronavirus pandemic. The statistics of detection and increase/decrease in the incidence of coronavirus in Africa are still incomparable with the peaks in the USA, Italy, Spain, France and other countries of the "developed" (according to the UN classification) world.

According to WHO, at the end of April 2020, outbreaks of coronavirus were recorded in 45 African countries (including both Tropical Africa and Maghreb), but the scale of the pandemic on the continent is incomparable with the scale in the EU and the United States - there were 30 thousand cases and 1360 deaths from coronavirus (WHO figures as of April 25).

This suggests that the consequences that Africa will face after the end of the pandemic will be quite acute for the entire continent, not so much due to the large number of cases and deaths from coronavirus, but due to the restrictions that have been established as partner countries (EU, USA, China and others) and the African states themselves to combat the pandemic.

a pandemic could be a change in the configuration of trade flows going both through Africa and within it. In fact, we will observe the first economic recession of the entire continent in the last 25 years, which is guaranteed to negatively affect both the economic and social, and political climate.

So, according to the World Bank, Tropical Africa expects a sharp decline in the level of GDP growth: if in 2019 it was at around 2.4%, then in 2020 this indicator has already become negative and amounted, according to April 2020, from - 2.1% to -5.1%.

At the same time, the level of recession in various countries of the region will be uneven: it is assumed that the most acute drop in GDP will be in the three largest national economic systems of the continent - Nigeria, Angola and South Africa. At the same time, a few months ago, Africa was called the "continent of the future."

According to the most preliminary estimates of the World Bank, the total losses to Africa from the consequences of the coronavirus could range from 37 to 79 billion US dollars. Causes of damage of this magnitude include the disruption of trade ties and bankruptcy of suppliers, which will inevitably negatively affect exports from Africa. This is especially painful for countries whose economic stability depends almost entirely on the level of exports.

The consequences of the pandemic will also affect the investment climate of the continent: a decrease in foreign aid flows and inflows of direct investment is expected against the background of continued capital flight from Africa. Representatives of the World Bank have already issued a statement on the planned provision of financial assistance to African countries in the amount of $ 160 billion over the next 15 months to overcome the consequences of the pandemic.

In 2019, Ghana faced a depreciation of the Cedi. Nonetheless, inflation was 7.2%, near the center of the Bank of Ghana (BoG) target range. The inflation rate is expected to increase to 9.7% in 2020 and decrease slightly to 8.5% in 2021 (IMF World Economic Outlook of April 2020).

The overall deficit reached 7% of GDP due to lower than expected revenues, spending on flagship programs, and unforeseen security spending related to new security challenges in the region.

The gross public debt reached 63.8% of the country's GDP, in part due to the exceptional costs of the energy and financial sector. Although the financing program with the IMF has been halted, the government said reforms aimed at fighting corruption, to improve fiscal performance and private investment should be continued.

Recurring power cuts have led the Ghanaian government to launch an energy diversification strategy, mainly by increasing the share of renewable energies and building nuclear power plants.