To combat COVID-19 transmission, countries around the world have used social distancing, travel bans, and economic lockdowns. The socioeconomic costs of these harsh measures are likely to be high, especially in Sub-Saharan Africa, where many people live on the edge and lack social safety nets.
The results of the Social Accounting Matrix multiplier model show that, despite being in place for just three weeks in April 2020, Ghana's urban lockdown caused GDP to fall by 27.9% and 3.8 million Ghanaians to become poor.
In contrast to the government's revised GDP growth rate of 1.5% for 2020, the model forecasts a contraction of 0.6 to 6.3% in 2020, depending on how fast the economy recovers.
The US$200 million set aside for Ghana's Coronavirus Alleviation Program would only cover a small portion of the projected US$ 2.3 billion GDP gap between the quick recovery scenario and the government's revised GDP route.
The government claims to have invested $19 billion on the fiscal effects of Covid-19, but Joy News analysis into the 2021 budget shows that the government actually spent $1.7 billion on the pandemic.
Relief for health workers, soft loans for Micro, Small, and Medium Enterprises (MSMEs), evacuation of stranded Ghanaians, household support, and other expenses were covered by the amount.
Even though a budget of $2.5 billion was authorized to help families, relief for health workers, and soft loans for micro, small, and medium enterprises, only $1.7 billion was used, according to Appendix 12 A and B of the 2021 budget on Coronavirus Alleviation Program (CAP).
The document also reported that deficit financing accounted for $16.4 billion of the total budgeted for Covid-19 expenditures of $19.4 billion.
In the meanwhile, the government has implemented additional levies and taxes to compensate for the cost of the original pandemic incentives. As part of revenue steps to help the economy recover from the impact of the global pandemic, the government announced new taxes on petroleum products, a 1% Covid-19 Health Levy on VAT Flat Rate System, and a 1% National Health Insurance Levy (NHIL) in the 2021 budget statement and economic policy.
The development, according to Information Minister Kojo Oppong Nkrumah, would help stabilize the economy without needing additional borrowing from other countries.
The truth is that the income-to-expenditure gap is widening. This widening has been exacerbated by Covid-19, and we are at a crossroads. If we continue to let the gap widen, we may reach a point where our economy is unable to pay for basic services, service its debt, pay wages and salaries, and do things that we were unable to do prior to 2016, and the government will be forced to intervene.
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