Coronavirus spread, ABFA and Stabilization Fund - Prof. John Gatsi writes

The announcement about coronavirus infection and spread mainly in China about two months ago, was considered by many as domestic China affair until the World Health Organization (WHO) announced global epidemic dimension of the spread.

So far many G7 countries recorded coronavirus infectious with effect on global economic prospects, trade and investment.

Already, schools in China and Italy have been closed down with the consideration of online delivery in tertiary educational institutions.

Airline business and world financial hubs are at crossroads. There is near transport business collapse in the epicenter of the virus in some countries such as China and Italy.

The effects on Ghana are many, in the past week GUTA [Ghana Union of Traders Association] warned of price hikes as members are not able to import.

The immediate positive effects on the cedi will be eroded by lower exports and fiscal losses because of extra precautionary measures in many economies.

Budget implementation is about to suffer as the average crude oil price of $58 per barrel projected in the 2020 budget has since dropped to around $44.

Meaning the first quarter is likely to suffer about 24% reduction and if volume of production remains the same then revenue loss maybe around same level.

If the lost of about $10 of crude oil price persists or remains at the current price level for an extended period it will have deep negative volumetric effects on petroleum revenue and there maybe the need for adjustments in macroeconomic expectations.

This has implications for the amount of money to be available for transfer to the ABFA and possible depletion of the stabilization fund.

Projects anchored on the ABFA, are expected to suffer if the global coronavirus spread is not contained and mitigated quickly.

The Roads Minister announced the coronavirus will affect disbursement of the $2bn Sinohydro bauxite backed loan. This means the year of roads is entangled by the coronavirus.

Indeed external developments do affect domestic economic outcomes.