Expert proposes two phase of funding COVID-19 emergency response
Adnan Adams Mohammed
Government is advised to use part of the money raised from
the US$3 billion Bond raised later part of January to keep the economy in a
holding pattern during the lockdown to reduce its blowback on citizens and
businesses.
A former Executive Director of Standard Chartered Bank, Alex
Mould further admonished that, government will need to seek funding from the
multilateral development banks such as the World Bank, AfDB, and IMF to
stimulate the economy post-lockdown. “Looking at the median spend by most
countries this comes to about 1-2% of GDP; if we use the average of 1.5% of GDP
this brings our required spend close to US$1 billion.”
The financial expert has intuited that, Government should
resist the temptation to prematurely end the lockdown in haste; but must weigh
both global and local conditions in order to make a well-informed decision for
the long-term greater good of Ghanaians. In the interim, some interventions can
be immediately implemented to improve the prevailing state of affairs. He
indicated that, there will be two economic phases in tackling the crisis arising
from this COVID-19 pandemic by governments, especially in the developing and
less developed countries.
“The first phase is to address the effects that a prolonged
lockdown of approximately 2-3 months will have on families and businesses. Most
individuals may be forced to expel their savings to survive in the lockdown
period as their income and/or revenue dwindle. And the second phase is how to
restore the economy back on track, post crisis”, he explained.
Also, the expert suggested that, planning now for funding
post-COVID-19 is essential, as demand is expected to be down for most
discretionary spend sectors i.e. tourism (airlines, hotels), entertainment (restaurants),
retail, etc.
“Also, we can expect lower than normal savings’ balances in
the banks resulting in needed support from government in the form of reducing
reserve requirements and injection of new money to achieve the liquidity needed
for new loans. Banks will have to
provide the much-needed funds in the form of soft loans to qualified companies,
small and medium enterprises etc. – including traders - who form the backbone
of the informal sector.
“For starters, the vulnerable- i.e. aged, distressed
families, street children/hawkers, homeless etc.- in our society have to be
catered for. One way this can be achieved is by providing financial support and
funding to them.”
According to Mr Mould, as mentioned earlier, small and
medium businesses particularly will be heavily hit; and thus require some much
needed assistance in the form of tax reliefs, stimulus packages etc. to stay
afloat, as they will most likely struggle to pay employees due to the COVID- 19
pandemic. Government can lend a helping hand by suspending payments of employee
and employer social security and income tax of private companies, to allow them
use the cash in other ways. Banks and financial institutions can provide
qualified businesses with liquidity in the form of zero interest loans and
“tide over” soft loans to encourage furloughing instead of outright layoffs; so
they can protect jobs by keeping on as many staff as possible.
“Additionally, government needs to immediately curb
inflation and start planning for the post- COVID-19 recovery of the economy to
avoid a recession. There is bound to be a logistics and supply chain gap to and
from lockdown areas, which will consequently cause price hikes. Food security
will come to the fore and of not tackled this could become a National Security
issue; so, with respect to agricultural produce, the Ghana National Buffer
Stock Company has a critical role to play in bridging this supply chain gap so
as to ensure regular sustainable availability of food and more importantly keep
inflation of food items at a minimum.
“These supply chain challenges will not only be felt on the
local front, but globally as well. How will our foreign supply chain be
impacted? Importation will inadvertently be affected as there is a dependency
on and preference for foreign essential goods over local goods. Government
would therefore have to ramp up local manufacturing to meet demands. For
instance, in the COVID-19 fight there has to be a local content re-alignment of
businesses and infrastructure to meet human and medical needs. Local manufacturing
of PPEs e.g. retooling seamstresses to make masks, carpenters to make beds for
medical facilities etc.”
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