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COVID-19 Pandemic Socio-economic Impact in Ghana

COVID-19 pandemic is causing huge impact on people’s lives, families and communities. Most African governments have implemented measures to encourage social distancing, focusing on border and travel restrictions, school closures, and bans on large gatherings. 

On the 15th of March, President Nana Akufo-Addo ordered the closure of all education institutions in Ghana, effecting some 9.2 million basic school students (kindergarten, primary and junior high schools) and 0.5 million tertiary education students.

By the 10th May, Ghana had recorded 4,700 confirmed cases of COVID-19. Health experts have predicted that there will be an upsurge in the number of confirmed cases in the coming weeks due in part to increased testing. This implies that the closure of the schools might extend to a longer period than expected.

The response of the Government of Ghana has been widely praised as well managed, led by science, competent and realistic. Tracing and limited testing has been the Ghana Health Services’ strategy to reduce the spread. Ghana’s prevention measures began with general advice to the public about hand  washing with soap, use of hand sanitizers and social distancing.

The economy of Ghana advanced 4.9% in the Q1 of 2020, decelerating from a 7.9% growth in the previous period (2019). The COVID-19 pandemic has severely impacted the Ghanaian economy, with the IMF projecting growth will slow to just 1.5 percent in 2020. The high cost of offshore oil and gas operations means extraction projects are less economically viable in the current low oil price context. Ghana will likely cancel a planned 2020 oil licensing round.

High gold prices provide some good news for Ghana, amid the economic woes. Gold mining continues, and the sector is confident it will improve on last year’s production. Ghana is reviewing its legal framework for mining, offering an opportunity to address mining’s contribution to the economy, as well as long-standing governance challenges.

While Ghana is not oil-dependent, the government has shown worrying indications of reliance on oil revenues despite the uncertainty around the future of oil. Addressing the COVID-19 pandemic’s severe economic impact on the country during an election year may cause the Ghanaian government to engage in poor borrowing and spending decisions.

The social and economic disruption has rammed home some unavoidable “known-knowns” that can no longer be ignored. A significant number of the population live “hand to mouth” in financially precarious and socially wanting conditions. The economic statistics missed this. The measures to prevent the spread of the virus relied heavily on access to clean water and basic utilities. While the decline in wages and employment of migrant workers triggered by the COVID-19 pandemic is predicted to cause a significant reduction in remittances.

In response to the pandemic, the government set up an Inter-Ministerial Committee on Coronavirus Response chaired by President Nana Addo Dankwa Akufo-Addo. The key objectives of the committee were: limit and stop the importation of the virus; contain its spread; provide adequate care for the sick; limit the impact of the virus on social and economic life; and inspire the expansion of domestic capability and deepen self-reliance. The value of working towards active regional coordination in public health, debt finance, trade was clear.

By mid-March government announced to release US$100m to enhance Ghana’s response plan and temporary subsidies for water and electricity. Arguments about basic survival became increasingly vociferous during the lockdown, compounded by the uncertainty surrounding the date of return for workers “sent home”. The basic economic needs of the population naturally weighed heavily in the decision to lift the lockdown. With Ghana’s sizeable informal economy, it seems likely that the most vulnerable and low paid workers will go unprotected.

Summary of government proposed fiscal measures to mitigate the impact of COVID-19 pandemic:

  • Lower the cap on the Ghana Stabilisation Fund (GSF) from the current US$300 million to US$100 million in accordance with Section 23 (3) of the Petroleum Revenue Management Act (PRMA). This measure will enable the excess amount in the GSF account over the US$100 million cap to be transferred into the Contingency Fund, consistent with Section 23 (4) of the PRMA. The amount transferred into the Contingency Fund will be used to fund the Coronavirus Alleviation Programme (CAP). Through this process, an estimated GHȼ1,250 million will be transferred into the Contingency Fund to Fund the CAP. We therefore wish to seek approval from this August House for the Finance Minister to use the Funds which will be available in the Contingency Fund to fund the Coronavirus Alleviation Programme.
  • Arrange with BOG to defer interest payments on non-marketable instruments estimated at GHȼ1,222.8 million to 2022 and beyond;
  • Adjust expenditures on Goods & Services and Capex downwards by GHȼ1,248 million;
  • Secure the World Bank DPO of GHȼ1,716 million;
  • Secure the IMF Rapid Credit Facility of GHȼ3,145 million; Reduce the proportion of Net Carried and Participating Interest due GNPC from 30% to 15%.

However, in Ghana, the lifting of the lockdown was not just a choice between lives and economy, but a choice between lives and lives. Distributed food supplies have not reached everyone, and people are getting desperate. In order to prevent an escalation of infections there is the need for the government to develop and deploy suitable and effective social influence strategies at this stage of the fight against the pandemic. The government should continue working with all relevant stakeholders, including leaders of faith-based organizations, the security forces, the Ghanaian media, and national institutions such as the National Commission for Civic Education and agencies under the Ministry of Information. Some of the strategies can focus on persuading the population to conform to wearing face masks, washing hands and using hand sanitizers, and practicing social distancing, among others.

Most international migrants in Ghana come from the Economic Community of West African States (ECOWAS) region and are low-skilled workers with limited social protection, making them extremely vulnerable in times of crisis. Economic growth in sub-Saharan Africa will decline from 2.4 per cent in 2019 to -2.1 to -5.1 percent in 2020 (see chart above), the first recession in the region in 25 years, recent World Bank estimates noted. Individuals reliant on cross-border trade or employment may seek the services of smugglers and their transnational crime networks to circumvent current border restrictions, exposing themselves to the risk of being exploited and/or abused.

The most vulnerable, including survivors of trafficking and unaccompanied and separated children (UASC), require increased social protection and access to basic services from the state, including shelter, food programs, access to education and health, during and after COVID-19. The decline in wages and employment of migrant workers triggered by the COVID-19 pandemic is predicted to cause a significant reduction in remittances and as such directly reduce the purchasing power of beneficiary households and threaten to push them into poverty. Migration should be mainstreamed throughout the national COVID-19 response and recovery strategy.

The stimulus package announced by the government should target and support essential SMEs. SMEs that provide inputs and services to support other SMEs and particularly the agricultural sector. SMEs that have immediate demand for their products and services and the potential to create jobs must also be supported. There is also the need to ensure that disruptions to farmers’ access to inputs, such as seeds, fertilizers and insecticides, are eliminated.

There is a need to do more in order to provide adequate relief to the poor and vulnerable; quickly, safely, and effectively. To restore income, preserve livelihoods, and compensate for price hikes, direct cash payments to those in need are crucial. In countries with broad-based social protection systems, such as South Africa, a scaling up and re-purposing of existing grants as emergency relief can be effective. Yet, in Ghana, such systems remain limited in coverage and will need significant upgrading to respond to the pandemic. Specifically, the Livelihood Empowerment Against Poverty (LEAP) programme, which provides cash and health insurance to extremely poor households, has little presence in urban areas. It is now necessary to expand the LEAP programme to urban areas, especially in ‘hotspots’.

 

 

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