Question

Question 1 The novel corona virus disease (also known as COVID – 19) which started in WUHAN in December 2019 has grounded the global economy to a halt. World crude prices reached their lowest and trade among nations have generally slowed. Production has slowed and jobs are being lost across the globe. Globally, over seven million people have contracted the virus and over four hundred thousand have died. Ghana announced its first two confirmed cases of COVID – 19 on 12 March, 2020 and as at June 14, 2020, the number of confirmed cases stood at 11,964 with 54 deaths. The impact of the COVID – 19 pandemic on Ghanaian economy and the global economy at large is predicted to be very severe. The government of Ghana, like many other governments, is spending more funds on containing the pandemic and limiting the effect of the pandemic on the economy. The IMF Executive Board approved the disbursement of US$1 billion drawn under the Rapid Credit Facility (RCF) for Ghana on April 13, 2020 after receiving application from the country’s government. Given this background, briefly discuss the repercussions of the corona virus pandemic for the Ghanaian economy and foreign exchange market. Suggest ways of mitigating the effects of covid – 19 on Ghana’s balance of payments (BOP

Answer 1

Repercussions of the virus on the economy of Ghana would be drastic decline in the GDP rate of the country. High unemployment and inflation led by supply disruptions. Financial distress and low exports and imports which could impact the foreign exchange market. Low capital flows and demand for the currency as foreign capital flows away from distressed to safe haven countries. This will depreciate the domestic currency and impact the foreign exchange market in a negative way as imports will turn out to be expensive.

Ways of mitigating the effects of Covid-19 on BOP could be higher inflow of capital and government expenditure in increasing supply chains which will improve the level of exports of the country and keep the demand constant and the current account deficit at a stable level. Enhancement in the foreign exchange reserves to address the deficit if it increases drastically. Overseas investment will increase the capital flows if the government eases business restrictions.