Finance Minister, Ken Ofori Atta, has disclosed the projected 6.8 GDP growth for 2020 will shrink to 1.5 percent, with lingering effects on economic activity into 2021.
Government programmes for the year, he said, has been thrown out of sync by the coronavirus pandemic and posing significant challenges to operations and implementation of the 2020 Budget.
The Minister presented a Memorandum to Parliament on Thursday 28th May 2020 to access emergency financing from Bank of Ghana.
According to him, government will miss most of its economic targets due to shortfalls in revenues compounded by additional emergency spending, and tight financing conditions.
He stated that the revenue shortfalls arise from plunging crude oil prices; shortfalls in import duties and other taxes; and shortfalls in non-tax reverues.
These, he said, are significantly affecting the cash flows for the year and posing a threat to containing the pandemic.
He disclosed that preliminary assessment puts the fiscal gap at about GH¢ 21.42 billion.
He said, “The current domestic market conditions in the wake of the pandemic has reduced liquidity on the market.”
“Since the beginning of the year, there have been sell-offs by non-resident investors, which has heightened these liquidity constraints, therefore, financing the residual gap would not only signiticantly increase domestic interest rates but would be counter-productive by denying the private sector access to cheaper sources of financing,” he said.
He stated that global financing conditions have also worsened as investors have negative sentiments towards emerging markets.
President Akufo-Addo, he said, has instructed the Ministry to initiate a stabilisation and revitalisation plan for the country.
“The Ministry is, in this regard, developing a 3-year Covid-19 Alleviation and Revitalization of Enterprise Support Program (The Ghana CARES Program) to help stabilize and revitalize the economy, ” he said.
He disclosed that the Governor of Bank of Ghana, the Controller and Accountant General and Finance Ministry have agreed to trigger the emergency financing provisions as required under Section 30 of the Bank of Ghana Act, 2002 (Act 612) as amended.
This, he said, permits increasing the limit on the purchase of Government securities by Bank of Ghana in the event of any emergency, to help finance the residual expenditures.
“The Government has, therefore, decided to launch a special COVID-19 Relief Bond programme with a size of GH¢10.0 billion.”
“The coupon rate is pegged to the prevailing monetary policy rate with a 10-year tenor and 2-year moratorium on both principal and interest payments.
Bank of Ghana, he said, has released the first tranche of the facility amounting to GH¢5.5 billion to the Ministry of Finance consistent with global policy responses of Central Banks with large scale asset purcheses to provide support to manage the pandemic.
Frontpageghana.com/Uthman A. Marani