Coronavirus: Crude oil revenue down 15%, poverty up - Gatsi

The Dean of the School of Business at the University of Cape Coast, Prof John Gartchie Gatsi, has said the COVID-19 pandemic has caused the number of poor people in Ghana to increase while, at the same time, reducing Ghana’s upstream revenue sharply.

Speaking about the economic toll that the pandemic, which has, so far claimed 139 lives in Ghana has had on the country’s economy, Prof Gatsi told host of the Executive Breakfast Show Benjamin Akakpo in an interview on Monday, 13 July 2020 that “the extent of the damage is huge”.

Starting from the revenue the revenue point of view, Prof Gatsi said: “We do know that we expect a certain amount of revenue from upstream petroleum activities but because of the twin-problem of COVID-19 and geopolitical differences between Russia and Saudi Arabia that led to a downward trend in demand for oil, and the plummeting of prices”, Ghana’s revenue expectations in the upstream sector were “actually reduced” by “more than 50 per cent”.

“That is a huge toll on the budget for the year”, Prof Gatsi noted.

“Not only that”, he said, adding: “That has an effect on how much we can contribute to the Stabilisation Fund that we can use during times of turmoil”.

“That also has an effect on how much we can put into the Heritage Fund, praying that we’re able to sustain it to a future generation”, Prof Gatsi noted.

“And, so, that is from the perspective of petroleum revenue”.

Apart from that, Prof Gatsi also observed that: “You also do know that there is a global supply chain disruption where you cannot move goods out of your country so easily”.

“The demand for such goods have also gone down. That has reduced our imports and the important thing about imports is that the levels of import also bring revenue. So, what it means is that we have a low expectation of international trade revenue in terms of import duties, etc”.

Additionally, Prof Gatsi said: “The ports are not delivering like they used to be, in terms of revenue”.

“So, revenue is actually hard-hit, as a result of the pandemic”, Prof Gatsi emphasised.

He pointed out that while revenue is falling, expenditure is rising.

“And, of course, the interesting thing about not meeting revenue expectations is that, there has been a stream of increase in the expenditure stream as against lowering revenue”.

“Some, emanating from expenditure on COVID-19 activities in terms of its health implications, stimulus packages across the world, not only in Ghana”, he noted.

He said the pandemic has further “actually affected productivity”, as “some people cannot engage in business now because of the lockdown and its effects” as well as the observations of the protocols “mean that some people could not possibly work, so, productivity has gone down in some sectors of the economy and what that also means is that it has also reduced people who are comfortably within the middle class or living a comfortable life to the poverty line”.

“So, we can also begin to talk about the kind of increase in the level of poverty during the period, as some people have lost their job, some people also lost their businesses etc. So, we can keep on talking about the effect. It’s so huge”, Prof Gatsi noted.

He said the mercurial nature of the pandemic is making it difficult for even officialdom to put a figure to the extent of damage done. “One thing is that it is very difficult, even for the Finance Minister, to absolutely indicate the absolute figure in terms of the effect of COVID-19 because things keep changing”.