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"The Local Currency Performed Better In 2020 Than 2019 Due To Covid-19" - Osei Kyei-Mensah-Bonsu

The Major Leader in Parliament, Osei Kyei-Mensah-Bonsu has revealed that the local currency performed better in 2020 as compared to 2019 due to the covid-19 pandemic.

According to him, the external sector performance was also impacted by the COVID19 pandemic through the trade and financial channels.

Speaking on the floor of Parliament on Friday, the Majority leader said "Mr. Speaker, the external sector performance was also impacted by the COVID-19 pandemic through the trade and financial channels. The trade account recorded a lower surplus of US$2.0 billion or 3.0 percent of GDP in 2020 compared with US$2.3 billion, equivalent to 3.4 percent of GDP in 2019"

He also revealed that the decline in the surplus was driven largely by a 7.8 percent contraction in total export receipts, especially from crude oil exports, which declined sharply by 35.2 percent.

The Majority Leader further explained that the value of total imports contracted by 7.3 percent, reflecting a slowdown in import demand due to the pandemic.

"The lower trade surplus coupled with higher services outflows resulted in a current account deficit of US$2.0 billion, equivalent to 3.0 percent of GDP in 2020 compared to a deficit of US$1.9 billion, equivalent to 2.8 percent of GDP in 2019. These developments resulted in an overall Balance of Payments (BOP) deficit of US$630 million in 2020, compared with a surplus of US$1.3 billion in 2019" he added.

The Majority Leader also mentioned that the deficit in the BOP was on account of a marginal worsening of the current account deficit and the decreased net capital inflows in the capital and financial accounts.

Mr. Osei-Kyei-Mensah-Bonsu, however, hinted that the Gross International Reserves (GIR) stood at US$8.6 billion, equivalent to 4.1 months of imports cover, at the end of December 2020 from a stock position of US$8.4 billion, equivalent to 4.0 months imports cover, as at end-December 2019.

"Mr. Speaker, the foreign exchange market was relatively stable and the local currency performed better in 2020 than in 2019. Pressures from corporate demand, energy-related forex demand, and pandemic-induced portfolio outflows were offset by improved forex inflows mainly from the Eurobond issuance and the IMF Rapid Credit Facility. These were complemented by the substantial reserve build-up by the Bank of Ghana at the end of 2019" he said.

"Cumulatively, the Ghana Cedi depreciated against the US Dollar, the Pound Sterling, and the Euro by 3.9 percent, 7.1 percent, and 12.1 percent, respectively. This compares with larger depreciation rates of 12.9 percent, 15.7 percent, and 11.2 percent for the US Dollar, Pound Sterling, and Euro, respectively during the same period in 2019. It is worth noting that, the depreciation of the Ghana cedi against the US dollar in 2020 is the lowest recorded in the Fourth Republic, notwithstanding the COVID-19 pandemic" he mentioned.

Speaking on Fiscal developments, the Majority Leader explained that the 2020 fiscal policy objectives were adversely affected by the outbreak of the COVID-19 pandemic which resulted in the recalibration of the 2020 fiscal framework during the 2020 mid-year fiscal policy review to accommodate the unanticipated shocks and enable Government to implement policies and programmes to ensure that both lives and livelihoods were protected.

"Mr. Speaker, Total Revenues and Grants was revised downwards by GH¢13.4 billion to reflect the impact of the COVID-19 pandemic on revenues while Total Expenditures were revised upwards by GH¢11.8 billion to accommodate COVID-19 Related expenditures, resulting in a revised budget deficit of 11.4 percent of GDP for 2020" he averred.

The Majority Leader also hinted that the unprecedented impact imposed by the COVID-19 pandemic, led to the suspension of the set of fiscal responsibility rules for the 2020 financial year in accordance with section 3 (1) of the Fiscal Responsibility Act, 2018 (Act 982).

He added that despite the adverse impact of the pandemic on the Ghanaian economy, especially in the first half of the year, implementation of the 2020 revised budget was largely on track.

"The provisional data on Government’s fiscal operations from January to December 2020, indicate that, Total Revenue and Grants exceeded the revised target by 2.7 percent, amounting to GH¢55,132 million while Total Expenditures including arrears clearance amounted to GH¢100,052million, exceeding programmed expenditures by 2.4 percent" he said.

He was of the view that the consequent modest increase in total expenditures, despite the force majeure imposed by COVID-19 induced expenditures, was a clear indication that Government adopted prudent expenditure management measures over the period.

Story by: Joshua Kwabena Smith