The International Monetary Fund (IMF) is forecasting that Ghana’s export earnings will drop by US$1.8bn this year, as the COVID-19 pandemic drives down global crude oil prices and pushes the country’s economy to decelerate.
In 2019, the country exported goods and services amounting to US$15.6bn, but the Fund is projecting that given the economic impact of the virus, the country would rake in US$13.8 billion, representing an 11.7 percent decline.
Apart from the virus hitting export revenues, the Fund, in its latest country report, estimated that the economy’s import expenditure for 2020 would be lower than the amount for 2019.
Last year, the country’s total import bill was US$13.4bn, but this year, largely because of lower crude oil prices, the Fund is forecasting that goods worth US$11.6bn will come through the various entry ports.
The IMF’s report, which indicates that the COVID-19 pandemic will create bigger balance of payments challenges for Ghana, further predicted that foreign investors will generally shy away from the country.
The foreign direct investment recorded last year of US$3.3bn will this year drop by more than US$800m, estimates show, representing a fall of more than 24 percent to about US$2.5bn.
The Washington-based lender, which recently approved a US$1bn credit to Ghana, noted that the pandemic has created an urgent balance of payments need—justifying the issuance of an emergency lifeline to Ghanaian fiscal authorities.
The Fund noted that the disbursement will help address the urgent fiscal needs, which directly contribute to the balance of payments gap, and provide additional foreign exchange to avoid a sharp drop in international reserves.
It added that the urgent balance of payments need triggered by the coronavirus crisis, and caused primarily by sudden exogenous shocks, is expected to resolve within the next 12 months without major policy adjustments.
According to Finance Minister Ken Ofori-Atta in a speech presented to Parliament last month, the collapse in global crude oil prices and decline in economic activity caused by COVID-19 could see Ghana lose more than GH₵8bn in fiscal revenues.
Mr. Ofori-Atta was hopeful that the IMF’s emergency funding, in addition to other measures, would fill the yawning fiscal deficit—estimated to be 9.5 percent of GDP—created as a result of the economic turmoil brought about by the pandemic.
The Fund said its decision to vote the huge resources to the country was also to inspire confidence in the world’s second-largest cocoa producer while asking other development partners to come to Ghana’s aid.
The Deputy Managing Director and Chair of the IMF’s Executive Board, Tao Zhang, described the response as “timely, targeted and proactive”, which will go a long way in increasing health and social spending to support affected households and firms.
“The uncertain dynamics of the pandemic create significant risks to the macroeconomic outlook. Ghana continues to be classified at high risk of debt distress. The authorities remain committed to policies consistent with strong growth, rapid poverty reduction, and macroeconomic stability over the medium-term,” he said.
“Additional support from other development partners will be required and critical to close the remaining external financing gap and ease budget constraints.”