COVID-19 has hit each country in one way or another. The financial and economic impact has been grave and many are still not recovering from it. Commodity exporting countries such as Ghana have been hit the hardest due to the pandemic.
Here is everything you need to know about how COVID-19 has financially and economically affected Ghana.
The Primary Commodities Of Ghana
More than 80% of Ghana’s export revenue is generated from three main commodities. These include cocoa, crude oil, and gold. The United Nations Conference on Trade and Development (UNCTAD) has classified Ghana as commodity-dependent because of its export revenue figures.
Because of this, a sharp drop in the prices of these commodities will significantly impact Ghana. Oil and gas accounted for 3.8% of Ghana’s GDP two years ago, it is the second-largest global cocoa bean supplier, and it is the largest gold producer and supplier in Africa.
How The Pandemic Affected These Commodities
We all know that the oil demand dropped significantly during COVID-19 because industrial production was at a halt. Movement of freight, traveling, and trade was also at an all-time low. Due to all this, the prices of oil fell by a large amount.
That is why the effect of the drop in demand and prices had a significant impact on Ghana’s economy. On the other hand, more than one million farmers in Ghana depend on cocoa for their livelihood. Because of a decline in demand, many farmers were affected and the supply chain was also disrupted.
The only commodity that did great was gold. During the pandemic, the price and the demand for gold increased, and that was one win for Ghana. However, because of the fall in demand and price of cocoa and oil, Ghana’s credit rating fell to B-.
The IMF also approved a disbursement of $1 billion so the confidence of the creditors in Ghana could be improved. However, by the end of December 2020, the GDP growth of the country was at 0.9%.
COVID-19 will affect countries for a long time. However, it will affect commodity-dependent countries in a much worse way. Here are some likely impacts as a result of these problems:
- Reduction in production capacity of commodities
- Increase in the debt burden of the countries
- Reduction in revenue streams
- Lack of investment
- Money will have to be rerouted to debt servicing
Ghana will have to make many reforms to restructure its supply chain, scale investments, and enhance production capacity. It is not going to be an easy change, but it can be done if Ghana creates new policies and tries to cushion the short-term impact of the pandemic first.
No country has been safe from the effects of COVID-19, but commodity-exporting countries are seeing the worst times. If Ghana wants to survive this crisis, it will need help to create a stronger and resilient supply chain to better its economy in the coming years.