World Bank highlights three things gov’t has done right amid pandemic
World Bank Country Director for Ghana, Liberia and Sierra Leone, Pierre Frank Laporte, has enumerated three things the Government of Ghana did right amid the surge in recorded cases of the Covid-19 pandemic and its attendant impact on the economy.
Speaking at the University of Ghana Annual New Year School and Conference in Accra on Tuesday, January 25, Mr Laporte opined that government amid the ravaging effects of the pandemic on both developing countries including Ghana and advanced economies, did the right thing by implementing three strong mitigative measures.
The three mitigative measures he indicated are; (i) a strong health response, (ii) expansionary fiscal policy to counteract the decline in private activity and provide safety nets and (iii) relative monetary accommodation.
“In these cases, the priority is to ‘weather the storm’ and ‘keep the lights on’ and ensure that companies and households don’t go bankrupt, as a result of a shock that is temporary and exogenous and can bring back when it’s over,” he remarked.
“However, government needs to find what can be described as a ‘goldilocks’ response; either too little support and problems are delayed but not ultimately averted or; too much support and you exhaust your resources, weaken the financial sector and fuel inflation,” he added.
Speaking further and touching on the country’s inflation, he noted that, the government must give a boost to the country’s production capacity to deal with the continued rising inflation rate.
This is because a good production capacity would help speed up the country’s recovery process from the impact of the COVID-19 pandemic, contribute to economic stability and protect the livelihood of the poor.
Mr Laporte stated that, the pandemic, together with the slowdown in advanced economies, which affected the demand for oil globally, had a major supply shock that drove down growth recorded in 2020.
The situation, he said, required that: “Ghana boosts its health systems and social safety nets by boosting the production capacity of the economy, which is the most sustainable way of dealing with inflation.”
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Laporte noted that prior to the COVID pandemic, Ghana was growing at a fast pace, however, economic activities almost came to a halt, due mostly to restrictions to trade and normal economic activities because of lockdowns and other containment measures.
Again, the country missed its inflation target of 8%, and recorded a 12.6% inflation at the end of the 2021 fiscal year, something, Laporte said, was not good for the economy’s recovery.
“As you know, inflation in Ghana has exceeded the central bank’s target since October last year [2021], largely driven by global inflation, and there are many reasons to be concerned,” he said.
The country director observed that inflation was a terrible thing for the economy, especially, for the poor, and that dealing with inflation through monetary policy required “tightening”, which was also costly because it increased the price of credit for firms and the government.
He also noted that: “the public debt rising from 60% of gross domestic product (GDP) in 2019 to the high 70s in the late 2021 as a result of higher cost of debt servicing, was unavoidable.”
Nonetheless, Laporte, said, there was the need to “lay out a road map for returning to a state of equilibrium that would be credible, which means that we require efforts not only from creditors, but also from tax-payers, and beneficiaries of government spending.”
He promised that the World Bank would continue to support the country in its pathway to recovery and resilience through analytical work on debt, revenue mobilisation, and construction of financing.
