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Opinions of Wednesday, 29 July 2020

Columnist: Samuel Okyere Donkor

COVIDNOMICS – Ken Ofori-Atta and the future of Ghana

Finance Minister, Ken Ofori-Atta Finance Minister, Ken Ofori-Atta

An intervening factor has broken the chain of global economic growth contributing to the revision of the GDP growth from 6.8% to 0.9% in Ghana.

This can be seen as a step in the right direction coupled with the Finance Minister's proactiveness during the Mid-Year budget review presentation and the prudent measures taken based on the recommendations set up in my earlier write-up titled, “COVIDNOMIC – Should Ofori-Atta Pause, relax or nurture Ghana’s economy”.

Ken has shown his preparedness to nurture the economy but it comes with patience and a level of constant adjustments in the coming years.

This Mid-Year review is a unique budget and many experts find it difficult to depart from the traditional economic principles. We are in “COVIDNOMICS”, it's about savings, investments, policy measures and reviving the economy. It is imperative to explain how the NBSSI will move forward during COVIDNOMICS.

I reiterate my preposition on the mid-year budget review, as advisory but not binding.

The Government in its mid-year review strategy used NBSSI as a driven component for the growth of the economy and to help revive SMEs and other enterprises. An active COVID-19 results in a high degree of uncertainties in the entire economy; simply put, ‘having too many good cars on a bad road'. In this latest write-up, my investment bias approach will be maintained in mitigating the risks in the economy.

The risk taxonomy for NBSSI as a diversified strategy for the economy will be classified from medium to high risk due to the mode of disbursement of funds. Covidnomics present a situation, where risk covers both the possibility of the actual outcome being worse or better than expected.

The National Board for Small Scale Industries (NBSSI) would require a comprehensive risk assessment and action plan for Adom Micro soft loans, Anidasuo Soft loans, and the CAP BuSS Scheme for a successful implementation of the initiatives.

The payment platform for Adom Micro Soft loans must be robust to curb the influx of fraudulent activities both internal and external, coupled with an efficient management system to check the deficiencies. Furthermore, SMEs must be vigilant to identify ‘Rogue leaders or agents’ within the communities who will find ways to out-smart and extort a percentage of the amount received as well as organised “Momo” fraudsters.

The NBSSI project is expected to partner with certain financial institutions to disburse the funds. It is critical that the government established a supervisory financial body that will oversee the disbursement of the funds to the SMEs.

What happens to the establishment of the National Development Bank (NDB) as indicated in the main 2020 budget read in November, 2019?

The Anidasuo soft loans to be carried out with some participating financial institutions would subject the application to rigorous processes which was the practice before the clean-up exercise. This is likely to cause delays and bureaucracy, which would in effect undermine the objectives of the Government to support the businesses within the economy. I therefore call on Ken Ofori-Atta to use the NDB to drive this programme to avoid any misapplication and misappropriation of the funds. This will also help to reduce the transmission channel likely to negatively influence the “covidecomomic” indicators, especially interest rate and inflation in the long-term.

The Ghana CARES is a laudable idea from the Finance Minister and I welcome the National Unemployment Insurance Scheme initiative for the citizenry. I would like to point out that 70% of our economy is informal and as a result such initiative must be tailored towards specific sector employers who are badly hit by the pandemic.
I recommend the absorption of private education, aviation, hospitality and services, and manufacturing sectors based on the following criteria for the National Unemployment Insurance Scheme. Such intervention programme under the scheme for workers must be Persons or Individuals or Deceased relatives or Families affected by:

1. Only COVID-19

2. Tested Positive for COVID-19 or experiencing symptoms and in isolation

3. Place of employment closed due to COVID-19

4. Major support for family because head has died due to COVID-19

5. Not in receipt of any of the Government funds or grants or loans

6. Provides self-certification that he/she is unable to work or available to work due to COVID-19

In this situation, the government must consider the duration for the assistance or support for the relief which must not exceed twelve (12) weeks after the reading of the 2020 mid-year budget review. This must be guided by the risk of avoiding improper payment procedures, selection bias of beneficiaries, accessibility and documentation processes, and estimation of individual or group relief amounts.

The former Governor of the US Federal Reserve, Ben Bernanke, reminds us in his book titled, “The Courage to Act” that during crises, people are distinguished by those who act and those who fear to act”.

Covidnomics Policy

It is fundamental that “covidnomic” would require extensive and in-depth policy initiatives to sustain economic growth and development. Even though Keynes' short-run theory over the period has fallen out of scope due to increase in government expenditure; creating a large deficit and huge debt portfolios of economies. This situation would worsen during this pandemic and has necessitated the International Monetary Fund (IMF), Development Partners and Nations to revise their GDP growth downwards including Ghana.

To this extent, the UNDP policy documents assessment report on Venezuela this year indicated that the covid-19 is now a Country-Specific Risk and would require prudent fiscal mitigating measures. The country would be required to spend more than its revenue for the interest of improving livelihoods and sustaining the economy to avoid recession.

We should be mindful and careful of the policy measures being implemented to control the pandemic and reduce covidnomics effect. Since the IMF has not developed policy guidelines for countries to adopt and to help pull through this pandemic, it is nevertheless clear that the pandemic is now a Country-Specific Risk and hence, its control and effect on the economy will be dependent on the good policy measures laid down by the government both in the short-to-long term.

For these reasons and under paragraph (379) of the 2020 mid-year budget review of Ghana, it was indicated that the Ghana government contracted the Institute of Statistical, Social and Economic Research (ISSER) to undertake a covid impact assessment on the economy by sampling 88 districts. It is important that this report is made available for technocrats, scholars and academics to study, model, proffer policy and investment measures in order to address the country’s specific risk. The availability of the said report will help leverage and model a good policy framework to further support the good works of the Finance Minister, Ken Ofori-Atta, under the leadership of President Nana Akufo-Addo, towards the goal of stabilizing the economy, improving the lives of Ghanaians to obtain better and greater opportunities under the pandemic.

So far it can be said that the economy has been driven on the three (3) sector model proposed by Keynes. It is crucial that a conscious effort is made for the sectors of the economy including aviation, harbour, and cross-border opens up to help government and managers of the economy to:

1. assess the effect of external pressures on the economy under the covid-19 rather than later

2. gather alternative way of mobilising revenues to support the Ghana CARE agenda

3. gather information and data to help mitigate the expected second wave of the pandemic on the country especially this election year

4. prepare and outline measures to safeguard and prevent the spread of the virus from abroad

5. help minimize the uncontrolled travel and trade interference within the aviation and port sectors of the economy

The urgency of the pandemic demands a lot of balancing act to revive the economy and to manage the spread of Covid-19. According to the Ghana Health Service (GHS), confirmed Covid-19 cases as at 28th July, 2020 stands at 33,624 whilst the recoveries and deaths recorded for the same period stands at 29,801 and 168, respectively.

With these statistics, I would encourage the leadership of the country to test the Keynes model by opening up the borders for some periods. This will help evaluate the risks if a second wave hits the nations of the world including Ghana.

“We can’t rebuild an economy on half-price meals - we need a productivity revolution” said by Philip Salter, the Founder of Entrepreneurs Network.