Business24 Newspaper (April 17-2020)

EDITION B24 | 31

FRIDAY APRIL 17, 2020

THEBUSINESS24ONLINE.NET

KPMG backs agric sector to brave COVID-19 shock

Boost for stable power with Asogli’s new autotransformer

BY NII ANNERQUAYE ABBEY

Despite Ghana’s economy set for its lowest growth in 37 years due to the COVID-19 pandemic, the agricultural sector, the source of livelihoods for millions of smallholder farmers, is likely to escape the havoc being wreaked by the virus, a new KPMG report has said.

The report, which provides a Ghanaian perspective on the economic impact and implications of COVID-19, argued that the agricultural sector will come out better than other sectors due to its lower reliance on intermediate imports.

The pandemic, KPMG said, presents an opportunity to boost domestic production and consumption of food commodities such as rice, maize, cassava, yam and chicken, and to export commodities in which Ghana has comparative advantage to the West African sub-region.

Nevertheless, the sector, which recorded a 6.4 percent provisional growth rate in 2019, would likely not attain the 5.1 percent growth Finance Minister Ken OforiAtta projected when he delivered the 2020 budget statement to Parliament last year. This reflects the sharp downgrading of the overall 2020 economic growth forecast from 6.8 percent to

MORE ON PAGE 3

Electricity subsidy to cost GH¢1bn

Although smallholder farmers contribute significantly to the country’s agriculture sector, they remain among the most economically vulnerable.

MORE ON PAGE 2

MORE ON PAGE 2

ECONOMIC INDICATORS

ANTI COVID-19 MEASURES MAY HAVE TO CONTINUE- OKOE BOYE

REST OF APRIL TO SEE STABLE PUMP PRICES

USD$1 =GH¢5.6896*

EXCHANGE RATE (BANK RATE)

USD$1 =GH¢5900.*

NATURAL GAS $/MILLION BTUS

14.5%*

GOLD $/TROY OUNCE

GHANA REFERENCE RATE

15.12%

CORN $/BUSHEL

OVERALL FISCAL DEFICIT

7.8%*

COCOA $/METRIC TON

PROJECTED GDP GROWTH RATE

MORE ON PAGE 3

BRENT CRUDE $/BARREL

*POLICY RATE

PRIMARY BALANCE.

MORE ON PAGE 13

INTERNATIONAL MARKET

*EXCHANGE RATE (INT. RATE)

AVERAGE PETROL & DIESEL PRICE:

31.17 1.68 1,778.20 329.50 2,288

2.6

COFFEE $/POUND:

+5.70 ($108.30)

1.4% OF GDP

COPPER USD/T OZ.

220.15

GHc 5.13*

SILVER $/TROY OUNCE:

16.39

2

| THEBUSINESS24ONLINE.NET

FRIDAY APRIL 17, 2020

NEWS/EDITORIAL

Editorial: Agric sector must be central post-COVID-19 1

Wash your hands 2

A new KPMG report that shows that the agricultural sector, is likely to largely escape the economic impact of the coronavirus (COVID-19) is good news for a sector that receives less support than it deserves.

According to the accounting firm, COVID-19 presents an opportunity to boost domestic production and consumption of food commodities such as rice, maize, cassava, yam and chicken, and to export commodities

3

1.5 percent as a result of the pandemic.

According to KPMG, the general uncertainty caused by the pandemic could lead to food shortages and panic buying, which may induce food inflation, currently at 8.4 percent. Overall consumer price inflation stood at 7.8 percent in March.

Other impacts The audit firm’s report stated that dampened demand due to the government-imposed lockdown would

If you are sick, wear mask Brought to you by

LIMITED Copyright @ 2019 Business24 Limited. All Rights Reserved.

Editorial Team Dominic Andoh: Editor Eugene Kwabena Davis (Head of Parliamentary Business & Commodities) Benson Afful (Head of Energy & Education) Patrick Paintsil (Head of Maritime & Banking) Nii Annerquaye Abbey (Online Editor) Marketing Alexander Lartey Agyemang (Business Development Manager) Ruth Fosua Tetteh (Dept. Business Development Manager) Gifty Mensah (Marketing Manager) Irene Mottey (Sales Manager) Edna Eyram Swatson (Special Projects Manager ) Events Evelyn Kanyoke (Snr. Events Consultant) Finance/Administration Joseph Ackon Bissue (Accountant)

jor source of food production and income for the population in general, especially in the rural areas.

Generally, smallholdings are a family affair, run in a rudimentary and inefficient way. A small improvement to the productivity of 100 farms via training or giving access to better fertilizers can have a huge impact.

The large majority of smallholder farmers operate on their lonesome on lands which are isolated and cut off from towns and cities.

They are really hard to reach, let

alone help and engage in conversation.

In recent times, more and more firms are getting it right by introducing new finance mechanisms to help farmers’ access loans and plan for their future. Farmer training is working wonders at boosting productivity too.

Indeed, so much more ought to be done to ensure the agricultural sector plays a central role in the economic revival post-COVID-19.

KPMG backs agric sector to brave COVID-19 shock Continued from page 1

Cover your cough

in which Ghana has comparative advantage to the West African sub-region.

According to KPMG, the general uncertainty caused by the pandemic could lead to food shortages and panic buying, which may induce food inflation, currently at 8.4 percent. Overall consumer price inflation stood at 7.8 percent in March.

However, if the agricultural sector is to play a central role, we need to pay attention and support the millions of smallholder farmers. This group constitutes a ma-

take a heavy toll on the manufacturing sector—with industry as a whole also taking a significant hit.

The industry sector has been a mainstay in the plans of the Akufo-Addo administration, with policy initiatives like one-district, one-factory and fiscal stimulus packages for ailing manufacturers being implemented to fast-track industrialisation.

But the KPMG report, which predicts a general slowdown in industry’s growth, means that industrialisation plans may have to be reprogrammed to address the challenges the pandemic presents.

The report said, however, that there are opportunities industry could take advantage of to enhance local production for import substitution.

Mr. Ofori-Atta’s announcement of a syndication facility of GH¢3 billion to support industry, especially the pharmaceutical and manufacturing sectors, could help to boost the capacity of companies engaged in the production of essential goods useful in the fight against COVID-19.

With the exception of the mobile network operators, the services sector is another segment of the economy to

bear the brunt of COVID-19.

According to KPMG, “continued lockdown and border closure will impact trade and the tourism subsectors. [The] banking sector [will] be impacted due to potential default [and the] telecommunications sector [will] record [a] positive trend due to rising demand for data.”

With the pandemic on course to reverse some of the painstaking macroeconomic gains of the last three years, the audit firm called for a new budget statement to address gaps as well as reset targets.

Electricity subsidy to cost GH¢1bn

BY BENSON AFFUL

The government’s threemonth electricity subsidy to cushion coronavirusinduced financial pressures on households and businesses will cost GH¢1 billion, Energy Minister John Peter Amewu has said.

The amount is in sharp contrast to the Africa Centre for Energy Policy’s (ACEP) estimate that the subsidy, to be enjoyed from April to June, will cost GH¢3 billion.

President Nana AkufoAddo last week said his government will fully absorb electricity bills of lifeline consumers—people who consume between 0 to 50 kilowatt-hours per month—in the second quarter of the year, while the other categories of consumers will enjoy a 50 percent discount within the same period.

Addressing the press yesterday in Accra, Mr. Amewu said about 87 percent of the Ghanaian population who have access to the national grid

will benefit from the relief.

This covers a total customer population of 4.8 million meters.

He said the Electricity Company of Ghana (ECG) currently oversees one million meters for lifeline customers, which amounts to 27.4 percent of its customers.

In the wake of the subsidy announcement, energy sector watchers warned of dire implications for the debt situation in the sector, said to be in excess of US$2 billion.

Benjamin Boakye, ACEP’s Executive Director, said in a statement on April 14 that the power sector is reeling from debt, with no end in sight for debt accumulation.

“The current outstanding debt to Independent Power Producers (IPPs) stands in excess of US$1 billion. Last week, government had to intervene to pay for unpaid gas utilised for power generation to the tune of US$100 million to avert a calamitous action by the OCTP partners to draw down World Bank guarantees for the projects,” he said.

“This picture is gloomy

Energy Minister, John Peter Amewu, estimates that the three-month subsidy for a customer population of 4.8 million meters due to the COVID-19 pandemic will cost GH¢1 billion.

enough, without exhausting all the challenges in the power sector, for careful consideration of actions that further worsen the financial sustainability of the sector,” he added.

Finance Minister Ken OforiAtta in February indicated that government has set aside US$1 billion of the successfully raised US$3 billion Eurobond to address the debt challenges in the energy sector.

NEWS

THEBUSINESS24ONLINE.NET

FRIDAY APRIL 17, 2020

3

Boost for stable power with Asogli’s new autotransformer

BY BENSON AFFUL

The country is set to experience improved stability in electricity supply during and after the COVID-19 pandemic, as an independent power producer, Sunon Asogli Power Limited, has installed a new autotransformer.

The autotransformer will bring stability and reliability to the national grid to curtail power cuts in the country, Elikplim Kwabla Apetorgbor, Chief Executive Officer of the Chamber of Independent Power Producers, Distribution Companies and Bulk Consumers (CIPDIB), told Business24 regarding the impact the autotransformer will have on the energy sector.

“The whole industry crisis is fuel, and the grid’s current configuration is not flexible enough to create more demand. Most of the unsatisfactorily-served demand is on the 161kV system and most of the new generation plants are on the 330kV—hence the congestion on the national grid resulting in blackouts or intermittent power cuts,” he added.

Power congestion on the 330kV Aboadze-Volta

Recent power outages in some parts of Accra are expected to stop with the installation of a new autotransformer by Sunon Asogli Power Limited

transmission line has made it difficult for the country to ensure stable and reliable power supply. This line mainly transmits electricity from three power plants—Amandi (192MW), Karpowership (450MW), and Sunon Asogli Power (360MW).

However, due to the limited capacity of the transformers on the line, its current maximum transmission capacity is only

340MW, which means many generators connected to the line cannot be dispatched.

To alleviate this congestion, management of Sunon Asogli told Business24 it has become imperative to acquire and install a 330kV/161kV autotransformer between Asogli’s 330kV substation and the existing 161kV Kpone collector substation.

The project is expected to add

an extra 200MVA (Mega Volt Amp) transmission capacity to the 330kV Aboadze-Volta transmission line, which will not only alleviate congestion to ensure stable power transmission and supply but also add more than 1500GWh of electricity per year to the national grid, transmitted from the 330kV network to the 161kV network.

The US$1million autotransformer project will also forestall the limitation and halting of power transmission to neighbouring countries.

This means that the operation of the electricity system will become more reliable, safer and economical, the company said.

Commending government for its handling of the outbreak of the novel coronavirus, the management of Sunon Asogli said ensuring stable electricity transmission and supply in the country is key in fighting the pandemic, which is what the project seeks to do.

It added that the company is bent on supporting the government in developing the country as a power hub.

Ghana’s current installed power capacity is 5,082.5MW, of which dependable capacity

is 4,613MW. Independent power producers are responsible for 44 percent of dependable capacity, while the state-owned producers (i.e., Volta River Authority and Bui Power Authority) account for 56 percent. The Energy Commission, the sector regulator, pegs peak demand (6pm-10pm) for 2019 at close to 2,700MW, while off-peak demand is under 2,000MW. With millions of people staying at home because of the coronavirus-induced lockdown, this could boost demand for electricity, especially residential demand in the off-peak hours. This could possibly be offset, though, by a fall in demand from commercial or nonresidential customers in light of the closure of most businesses and institutions in the areas affected by the lockdown.

Despite the excess dependable capacity over peak demand, actual availability, according to power producers, rarely exceeds 2,700MW because of inadequate or unreliable fuel supply and transmission system failures.

Rest of April to see stable pump prices

BY BENSON AFFUL

Fuel prices at the pump will remain largely stable in the second pricing window (April 16-30) of this month, the Institute of Energy Security (IES), an industry think tank, has told Business24.

Raymond Nuworkpor, Research & Policy Analyst of the institute, said taking into consideration the relatively modest reduction in prices of gasoline and gasoil on the international market as well as the 2.29 percent marginal reduction in the price of Brent crude, the IES foresees prices of fuel on the local market remaining largely stable.

“However, competition between Oil Marketing Companies (OMCs) to control and gain more market share may result in the selling price of fuel falling marginally,” he said.

Fuel prices at the pump experienced a reduction across some major oil marketing companies, including Shell, Goil, Total, Puma and Zen Petroleum, in April’s first pricing window, which ran from April 1-15.

According to Nuworkpor,

while Goil, Zen, Puma and Total cut prices to sell at an average of GH¢4.19 per litre for gasoil and gasoline, Shell gave away the largest percentage reduction of 16 percent, pricing at GH¢4.29 per litre.

During the month’s first pricing window, crude oil prices on the international market remained largely around the US$30 margin.

Prices initially moved above US$30 from the first week of the month as the market reacted positively towards the scheduled Organisation of the Petroleum Exporting Countries (OPEC+) meeting.

Following this, Brent crude declined marginally by 2.29 percent from US$30.58 per barrel to US$29.88 per barrel.

On the revenue side, Ghana’s economy is expected to be impacted severely by the fall in oil prices, with Finance Minister Ken Ofori-Atta estimating a possible revenue loss of nearly US$1 billion.

This has prompted a sharp reduction in planned government spending as well as in the allocation of revenue to the national oil company, Ghana National Petroleum Corporation (GNPC).

Institute of Energy Security (IES) predicts stability in fuel prices for the second pricing-window this month.

4

FRIDAY APRIL 17, 2020

THEBUSINESS24ONLINE.NET

F E AT U R E

THEBUSINESS24ONLINE.NET

FRIDAY APRIL 17, 2020

5

In the fight against Covid-19, has Akufo Addo landed the crucial free kick? receiving the news with the discretion available to them.

And there is some justification to this.

The president cannot be expected to desert his duty to care and protect until the very minute another person takes the oath. One of these duties is to communicate effectively, to inform and to reassure. These addresses fall squarely under this presidential function. What happens with the coverage is of course another matter.

Were we to find that there has been a coordinated plan executed to gain and promote such nakedly partisan coverage, we would have room to complain.

BY DR. KOBBY MENSAH Months after a deadly pandemic first swept around the world, to say that we are “not in normal times” is perhaps a charming understatement. More than a hundred cities around the world are on “lockdown,” stay at home orders that are unprecedented for anyone alive now.

Economies have slowed down and are unlikely to roar back until 2021 at the earliest. Schools have been shut down and public places deserted.

The world is nothing like it was when we all wished one another a happy and prosperous new year just four short months ago.

Ghana has not been left out of this. In March, we recorded the first cases of infections – two persons who had travelled into the country. The government soon responded with a ban on public gatherings of more than twenty-five people at a time. These measures were widely welcomed, the noted exception being largely from those who thought the measures didn’t go far enough.

While these measures are undisputedly necessary, there is an obvious casualty.

2020 is an election year and Ghanaians will have to choose the next set of political leaders in December. In our frenetic political atmosphere, campaigning begins almost immediately an election is concluded and a president sworn in. But election years are the climax, when we move from media barbs to the full on contact sport of campaigning in person, with large groups in attendance.

The opposition National Democratic Congress has already elected its presidential and parliamentary candidates.

The governing New Patriotic Party, on the other hand, was set to endorse the current president as its presidential candidate and legislative candidates in constituencies where it currently holds the majority on April 25th. That event has now been postponed indefinitely. There is now in effect, a moratorium on political activity, at least in the manner that we are used to it been conducted. Even if the logistical constraints

were not in place, openly campaigning for votes when citizens are living in mortal dread would be tone deaf, in bad taste and likely counterproductive.

In addressing the challenge however, the president has been presented with a unique opportunity to burnish his own credentials as a decisive and empathetic leader, which he has seized with both hands. President Akufo Addo’s dramatic late night addresses to provide citizens with updates on the pandemic as well as announce new measures his government is taking, have given him not just the urgent attention of citizens, but a chance to outshine an opponent whose hands are virtually tied to his back.

This assertion is borne out by coverage of these addresses in both traditional and social media. On the

days after each of these addresses, print, electronic and online media are saturated with details of the address, with the state and government-friendly media in particular leading with headlines such as “President announces interventions: water absorbed; 50% salary allowance for health workers; 3.6m PPE to be produced locally” (Stateowned Daily Graphic, April 6 2020) and Covid-19 fight: Government absorbs utility bills for three months” (The New Crusading Guide, April 6 2020). Very little attempt is made to question any of the claims made or to critically examine the real-world effect of these measures.

Fawning coverage from the traditional media is nothing compared to the triumphalist gloating that is displayed on social media by the president’s

partisans. This national exercise is perceived almost entirely through partisan lines, spawning viral posts and memes praising the president and disparaging his opponents. A widely popular trope specifically targets the electoral chances of the two leading contenders in the light of the president and government’s response to the pandemic, the conclusion of which is that the opposition candidate, former President John Dramani Mahama will have his hopes dashed.

All this is happening at a time when even covertly political interventions from the opposition are quickly derided as self-serving and out of step with the sombre national mood.

It can be argued that the president is merely doing his job while the media and public are relaying and

The onus is then largely on the media to serve their consumers better. When this is over, questions will have to be asked about how the media has conducted itself in the coverage of the pandemic in general and the president’s addresses in particular. We would need to examine whether providing an unquestioning, even fawning filter for political statements of any nature, even when they are coming from the president of the republic, is the best way to serve a public that needs perhaps more than just palliative declarations.

While we seek to augment our public health systems for another emergency of this nature, we must also do similar for our public information dissemination systems.

In the end, however, historical evidence suggests strongly that the public rallies around its leaders during times of existential crises. The Iraq war may have helped George W Bush win re-election in 2004 while some credit President Obama’s response to Hurricane Sandy, mere days away from the 2012 election, with helping him across the finish line. Even President Trump, widely panned by experts for his response to Covid-19, had a slight uptick in his approval ratings until his insistent showmanship in his daily briefings whittled them away. So it might well be that force majeures in electoral are decisive in their own right but we must take that the media does not offer another unwitting hand to incumbents.

6

FRIDAY APRIL 17, 2020

THEBUSINESS24ONLINE.NET

F E AT U R E

THEBUSINESS24ONLINE.NET

FRIDAY APRIL 17, 2020

7

Attention on COVID-19 is laudable, but neglect of our smallholder farmers is disappointing

BY REUBEN QUAINOO The world is at a standstill due to the COVID-19 pandemic, but the smallholder farmers who feed thousands of Ghanaians are not being given much attention and support.

Smallholder farming is a major source of food production and income for the global rural population in general, especially in the developing world. As many as 2.1-2.5 billion people are involved in farming smallholdings and there are perhaps 500 million smallholdings in the world (FAO 2010; IFAD 2013).

The good news is: there’s loads of potential to unlock.

Generally, smallholdings are a family affair, run in a rudimentary and inefficient way. A small improvement to the productivity of 100 farms via training or giving access to better fertilisers can have a huge impact.

The bad news is: it’s tough. The large majority of smallholder farmers operate on their lonesome on lands which are isolated and cut off from towns and cities.

They are really hard to reach, let alone help and engage in conversation.

More and more firms are getting it right by introducing new finance mechanisms to help farmers access loans and plan for their future. Farmer training is working wonders at

boosting productivity too.

But there is still so much that can be done. So far, too many companies have ignored this increasingly vulnerable tentacle of their supply chains.

Maybe 2020 will be the year that smallholder farmers get the attention and support they need to build resilience and sustainability for the long term.

The Coronavirus pandemic if not for anything has taught us how to appreciate the little things we took for granted, that is, having a social life, shaking hands, hugging, etc., which in our culture shows care and is a reflection of our affection.

I must quickly appreciate how countries, both large and small are putting in place measures to cushion their citizens, against further damage.

As of this weekend, some 1.5 million people worldwide have been infected with over 100,000 deaths. There is no vaccine or drug for it yet. It is unequivocal that the world in a long while has not seen anything this huge and the world is on lockdown and in fear.

An estimated 500 million smallholder farming families (representing more than 2 billion people) rely to varying degrees on agricultural production for their livelihoods. As the largest global segment by livelihood of

those living on less than US$2 a day, smallholder families are central to global financial inclusion efforts but reaching smallholders with financial services is challenging in Ghana.

Agriculture accounts for about 20% of Ghana’s GDP and employs 44.7 % of the working population. But the sector faces difficulty because of its strong dependence to climatic vagaries and raw materials prices.

Inadequate finances, climate change, poor pricing and marketing incentives, inadequate agricultural extension agents, pest and diseases and a lack of access to fertilizers are all contributing to the declining fortunes of the sector.

In the Northern and Upper West regions of Ghana for instance, more than 70 percent of the economically active population is engaged in agriculture activities. Small scale farmers in Ghana’s poor rural areas have limited access to the assets that would facilitate a shift from low-productivity subsistence farming to modern, commercial agriculture.

Major constraints to their livelihoods include lack of infrastructure and insufficient access to equipment such as agricultural inputs and technology, and facilities for storing, processing and marketing products.

Way forward in dealing with COVID 19 and food security in Ghana Firstly, farmers should be motivated and supported to increase their production.

The bulk of food supply in Ghana comes from smallholder farmers, however, existing policies that support their productivity has historically undermined their performance. There should be emergency funds for farmers who show evidence of being in production to access without repayment conditions.

Secondly, agriculture inputs should immediately be classified as essential materials and steps taken to ensure their uninterrupted supply to various depots. We suggest that the Ghana Armed Forces and other state actors be used to transport these vital inputs for farmers if the situation is not contained by the middle of April. This will ensure production is sustained and yields improved to substitute for the importation of the same commodities. Similarly, food transport and distribution should be considered as a national security issue and thus a protected activity under the restrictive laws.

Thirdly, the price control system should be instituted with immediate effect. We are not in ordinary times where market forces of demand and supply is allowed to determine the price of food.

Following the 23rd March experience in Accra where prices were triple within a day, the market forces are immoral and thus government must immediately issue price ceiling and offenders dealt with immediately to serve as a deterrent. This will protect the poor against the exploitative tendencies of the opportunists.

Mindful that Ghana is yet to hit the plateau of the infection curve, the government must prepare for the worst-case scenario and be ready to activate organized emergency food deliveries. This calls for efficient collaboration between the National Food Buffer Stock Company and transport operators on one hand and local and community organizations and farmers on the other hand to ensure enough buffer stock.

Conclusion Is this going to be the era that will cause Ghana and Africans to now take the informal sector serious, to make sure that the appropriate structures are put in place for its recognition and full integration into the wider economy? We keep our fingers crossed.

The writer is an agriculturist and a journalist with cross-platform experience working with Radio, Newspaper and Online platforms and received 2019 Outstanding Journalist in Agriculture Reporting by Ghana Chamber of Agribusiness.

8

FRIDAY APRIL 17, 2020

THEBUSINESS24ONLINE.NET

F E AT U R E

THEBUSINESS24ONLINE.NET

FRIDAY APRIL 17, 2020

9

Saving the developing world from COVID-19

BY MOHAMED A. EL-ERIAN

Declining coronavirus infection rates and plans to begin easing lockdown measures in some parts of the developed world have provided a ray of hope after weeks of unrelenting gloom.

But, for many developing countries, the crisis may barely have begun, and the human toll of a major COVID-19 outbreak would be orders of magnitude larger than in any advanced economy. With the United States having recently recorded more than 2,000 deaths in a single day, this is no trivial number. If the international community doesn’t act now, the results could be catastrophic.

Sub-Saharan Africa is a case in point. Several countries there would face significant challenges in enforcing social-distancing rules and other measures to flatten the contagion curve. The region’s already-weak health-care systems could thus quickly become overwhelmed by an outbreak, especially in a high-density area.

Africa has long suffered from a severe shortage of health-care workers, with only 2.2 workers per 1,000 people (compared to 14 per 1,000 in Europe) in 2013.

And few African countries have a meaningful supply of ventilators, a crucial tool for treating serious cases of COVID-19. Nigeria is reported to have fewer than 500 in total, while the Central African Republic may have no more than three.

Moreover, Sub-Saharan African governments have little fiscal and monetary space (or operational capacity) to follow the advanced countries in countering the massive impact of containment measures on employment and livelihoods. Spillovers from Asia, Europe, and the US – including depressed commodity revenues (due to declining demand and prices), rising import costs, a collapse in tourism, reduced availability of basic goods, lack of foreign direct investment, and a sharp reversal in portfolio financial flows – have already exacerbated these constraints. For those who had access to international capital markets, terms have become notably more onerous.

While Sub-Saharan Africa is not without some defenses – including strong family networks and cultural resilience, as well as lessons learned from the Ebola crisis – there is a real risk that

this COVID-19 shock would lock it in a race between deadly hunger and deadly infections. Some states, already rendered fragile by decades of weak political leadership or corrupt authoritarianism, may even fail, which could fuel violent unrest and create fertile ground for extremist groups.

The risks are not limited to the short term. Countries are also vulnerable to major future productivity losses, via both labor and capital.

Prolonged school closures and joblessness could contribute to increases in domestic violence, teenage pregnancies, and child marriage, especially in countries that lack basic infrastructure for remote schooling.

Simply put, Sub-Saharan Africa may be about to confront a human tragedy so profound that it could leave a generation adrift in some countries, with consequences that extend far beyond the region’s borders.

Two examples perfectly illustrate the multifaceted spillover risks.

First, by drastically reducing Africans’ current and future economic prospects, the COVID-19 crisis could eventually fuel even more migration than current forecasts anticipate.

Second, by triggering a

series of corporate- and sovereign-debt defaults, an uncontrolled COVID-19 outbreak could exacerbate the financial-market instability that the US Federal Reserve and the European Central Bank have taken such strong action to repress.

This increases the chances of reverse-contamination from the financial sector to the real economy.

The scale of the threat is not lost on the International Monetary Fund, which, through an enormous ongoing effort, has moved quickly and boldly to increase emergency funding. More than 90 developing countries have already approached the IMF for financial assistance.

Together with the World Bank, the Fund has also called for official bilateral creditors, including China, which has become a major creditor in recent years, to suspend debt payments by the poorest developing countries.

Leading the way here too, the IMF is providing immediate debt relief for 25 of its low-income member countries, using grant resources to cover their multilateral debt-servicing obligations for six months.

Meanwhile, some countries, such as China, have offered large in-kind medical donations (what less charitable observers have

described as “facemask diplomacy”).

But, to stave off disaster in vulnerable regions, the international community must do a lot more.

Advanced economies, in particular, should supplement the home bias that has (understandably) characterized their responses so far with a broader assessment of the global effects, including spillovers to and spillbacks from Africa. They should expand official funding assistance, facilitate broader debt relief, and urgently establish an international solidarity fund which other countries and the private sector could join.

Furthermore, developed countries should do more to share best practices for containment and mitigation of the pandemic. To facilitate this process, the World Health Organization needs to do a better job of centralizing and disseminating relevant information.

Advanced economies’ leadership, one hopes, will soon extend to the universal deployment of more effective medical treatments, or even a vaccine.

Finally, the international community must do a

lot more to crowd in privatesector resources. Much as it did in the developed countries, the private sector can play an important role in the crisis response in vulnerable regions, both directly and through proliferating publicprivate partnerships. While pharmaceutical and tech companies will do a lot of the heavy lifting, private creditors can help by working on orderly ways to reduce the immediate debt burden on more challenged developing countries.

But, again, this will require greater emphasis on enabling mechanisms. A bigger shift in mindset on the part of multilateral lenders and other international bodies (including the World Bank) will be needed.

The COVID-19 pandemic threatens to devastate large parts of the developing world. Only with a concerted, cooperative, and holistic approach can the international community avoid a large-scale humanitarian tragedy – and protect the rest of the world from destabilizing blowback.

Mohamed A. El-Erian, Chief Economic Adviser at Allianz, was Chairman of US President Barack Obama’s Global Development Council. He is the author, most recently, of The Only Game in Town: Central Banks, Instability, and Avoiding the Next Collapse

10

FRIDAY APRIL 17, 2020

THEBUSINESS24ONLINE.NET

F E AT U R E

THEBUSINESS24ONLINE.NET

FRIDAY APRIL 17, 2020

11

Showbiz after virus pain …will the sector survive the turbulence?

Musicians like Ghana’s King Promise have had to cancel many scheduled events and forego millions in potential earnings because of the outbreak of COVID-19.

BY WOODE JUSTINA NANA AHIMA Ambassadorial deals, tours and entertainment shows are either suspended or cancelled following the outbreak of the dreaded coronavirus, otherwise known as COVID-19 pandemic, which has brought the world on its knees.

The coronavirus pandemic has turned the world’s arts calendar upside down, as artistes and organisers around the world are either postponing or cancelling festivals, concerts, tours, theatre shows, movie premieres, and film and television productions.

Music stars keep calling off concerts, and tours as restrictions are imposed on travel and large public events all across the world due to the spread of COVID-19.

If the pandemic intensifies in the coming months, some entertainment pundits have argued, it will cost Ghana millions of cedis in lost earnings from the creative arts sub-sector.

Already, the government has said it will spend GHc1billion under a Coronavirus Alleviation Programme to cushion the impact of the virus on Ghanaians, as government tightens measures to control the spread of the deadly respiratory disease.

Announcing the package, President Nana Addo Dankwa Akufo-Addo said the amount would mitigate the impact of the coronavirus on businesses and households and ensure that job losses are minimized.

As Ghanaians await the impact the stimulus package will have on all the various sectors of the economy, some of the questions that must be asked are how much will be diverted into the creative arts sectors, and will that amount be enough to sustain the industry?

One of the country’s biggest annual entertainment events, the Vodafone Ghana Music Awards that was expected to take place this year will definitely suffer a setback, as experts struggle to predict when the pandemic will end.

This year, the nominees’

jam of the VGMA, which was scheduled for April 4 at the Koforidua Jackson Park, was postponed.

This was in compliance with the National Directives on Public Gathering due to the COVID-19 pandemic.

Like the VGMA, many events, which organisers have already invested in, will have to be postponed indefinitely, a situation that is likely to hurt an already struggling industry.

Ghanaian musician King Promise has postponed his on-going world tour due to the outbreak of COVID-19.

Having already performed in Berlin, Hamburg, Brescia, and Amsterdam, the Commando hitmaker’s March 8 sold-out London show was the biggest yet and had everyone talking.

His next concert, which was to be held in Canada, has however been postponed due to the outbreak of the deadly disease.

Stonebwoy’s American concert also adds up to the number of shows that have been put on hold due to the spread of the coronavirus.

The artiste, through his

management, released a statement saying, the US government banned all large gatherings in the country after the World Health Organisation (WHO) labelled coronavirus a pandemic.

“Our team has tried everything in our ability to make this show happen, however, the government has restricted every large gathering at this time as seen on every major news,” the statement read.

The management of Omini Media, operators of Citi FM and CitiTV has also announced a suspension of all of its outdoor events, in line with the president’s directive.

The affected events were the Accra Music Expo, originally slated for March 21, 2020, and the Music of Ghanaian Origin (MOGO), which was originally scheduled for March 28, 2020.

It is, however, incumbent on all stakeholders as well as investors in the showbiz industry to, as a matter of urgency, start developing strategies that will help rejuvenate the sector after the virus is defeated in the

country.

It is undeniable fact that the creative arts sector in any economy has the capacity to propel economic growth if policies that are germane to the industry are implemented.

In 2019, the United States Bureau of Economic Analysis and the National Endowment for the Arts released a report that shows that the Arts industry contributes 4.2 % of the gross domestic product; representing US$763.3 billion.

The creative arts industry in that country has contributed more to GDP than agriculture, warehousing and transportation; employing 4.9 million people who earn US$370 billion.

In the United Kingdom, the creative industry grew at twice the rate of the economy; contributing more than £85 billion in 2015, representing 5% of the UK economy’s gross value added at that time as published by the Department for Digital, Media, Culture and Sport.

12

FRIDAY APRIL 17, 2020

THEBUSINESS24ONLINE.NET

NEWS

THEBUSINESS24ONLINE.NET

FRIDAY APRIL 17, 2020

13

Anti COVID-19 measures may have to continue- Okoe Boye Dr. Bernard Okoe Boye, Deputy Health Minister Designate, has said the Government’s current measures to contain Covid-19 might have to continue for the next two weeks.

This is because the nation would enter a crucial stage within the period where many of the backlogs of test results would be announced.

“The situation from the test results will give an idea of where Ghana is likely to hit as in the plateau regarding the global plague,” he explained.

Dr. Okoe Boye, who is the Board Chairman of the Korle-Bu Teaching Hospital, in Accra, said this when he appeared before the Appointments Committee of Parliament for vetting for the deputy ministerial position, on Wednesday.

He said: “The cases are not necessarily cases of yesterday. “We have a lot of samples in the queue for us to test them because of the limitation in testing capacity, although Ghana is one of the highest testing regions in the continent.”

When he was asked to give his opinion, as a medical professional, as to a cut-off

point for disease, Dr OkoeBoye said he was hopeful that the cases would begin to decline from May. He stated: “It’s my expectation that this week and at worst, next week, should be the period within which we would have seen most of these results coming. That would give us an idea of where we are likely to hit as in the plateau and then later see some dropping.

“Beyond these two weeks any other cases that will come are likely to come in ones or twos from contacts that were traced.

“I’m confident that by the time we end this month and enter into May; our graph

should be pointing downwards, and not only downwards, but should be going towards levels that are very tolerable and encouraging.

Life should be back to normal by the time we complete May,” he said.

Amidst the outbreak of the novel coronavirus, the Government placed parts of the nation under a lockdown from Monday, 30 March, 2020.

It affects 40 localities in the Greater Accra Metropolitan Area, extended to Kasoa in the Central Region, and Greater Kumasi Metropolitan areas and contiguous districts.

Other general measures include a ban on public gatherings, indefinite suspension of schools, observing of social distancing, closure of the borders and entry points to the nation, stoppage of flight operations and social protection interventions.

The Deputy Health Minister Designate said close contact among people facilitated the spread of the respiratory disease as indicated by the results of contact tracing.

Dr. Boye, Member of Parliament (MP) for Ledzokuku Constituency, 38, is a public

health practitioner.

He was nominated by President Nana Addo Dankwa Akufo-Addo early in the month to replace Mr. Alexander Abban, who has been re-assigned by the President as a Deputy Minister for Communications.

Some commentators have described the nomination of Dr. Okoe-Boye, a member of the Government’s Communication Team on Health as a “coronavirus appointment”, but the nominee told the Committee that he would support the Sector Minister and all relevant stakeholders, to tackle Covid-19 and all other health related issues.

He welcomed suggestions to explore the use of herbal medicine to treat COVID-19 patients, saying a desk could be established to ascertain whether or not some herbal medicines could be effective in the treatment of patients.

Once scientists were able to prove that a herbal preparation was safe for use in human beings and also had the requisite efficacy, the appropriate bodies would grant the approval, he said.

On the sensitisation campaign, the Deputy Health Minister Designate suggested

the engagement of opinion leaders and personalities that people in their communities could identify with and spoke their local languages.

He dispelled rumours that hospitals were not attending to out-patients and explained that because of the times, the care for out-patients had been reviewed and only emergency cases were being attended to for now.

The nominee compared that fast spread of the novel coronavirus to that of the viral eye disease, commonly called Apollo, and urged people to strictly observe the health protocols, such as the frequent washing of hands with soap under running water.

He agreed to a suggestion to ensure that the nation would not over concentrate on Covid-19, at the expense of other diseases, and also on the need to expand the mortuary facilities at the KBTH. The Committee commended the nominee for showing a lot of promise for the position.

He announced that he would resign his position as Board Chairman of the premier hospital, if approved for the position. (GNA)

Jan Smets to take over from Etienne Davignon as Co-Chairman of Board of SN Airholding In its latest meeting, the Board of Directors of SN Airholding has decided to appoint Jan Smets as its CoChairman.

Thorsten Dirks, Member of the Lufthansa Group Executive Board & Chief Officer IT, Digital & Innovation, will chair next to Jan Smets and herewith keeps his position as CoChairman of the Board.1 Christina Foerster, Member of the Lufthansa Group Executive Board, Customer & Corporate Responsibility and former CEO of Brussels Airlines, will join the SN Airholding Board of Directors as new member, herewith replacing Jörg Beissel, Head of Corporate Controlling at Deutsche Lufthansa AG. After 18 years at the head of the SN Airholding Board, guiding Brussels Airlines through challenging times, Etienne Davignon, believes the time is right to hand over his Co-Chairman responsibilities to Jan Smets.

He remains, however, an active member of the Board of Directors.

JAN SMETS “Brussels Airlines is facing turbulent times. With his renowned expertise in economics and in-depth international experience, Jan is the right person to support the Management Board of Brussels Airlines in guiding Belgium’s home carrier through the unprecedented crisis caused by worldwide Coronavirus pandemic. In

CHRISTINA FOERSTER parallel, I am very happy to welcome Christina Foerster onto the Board. As former CEO of Brussels Airlines and member of the Lufthansa Group Executive Board, her extensive knowledge of both entities are definitely of an added value to Brussels Airlines,” he said.

The new Board of Directors of SN Airholding consists

now of the following members: Jan Smets, Former Governor of the National Bank of Belgium (Co-Chairman); Thorsten Dirks, Member of the Lufthansa Group Executive Board & Chief Officer IT, Digital & Innovation (CoChairman); Minister of State Etienne Davignon; Heike Birlenbach, Senior Vice

President Sales Lufthansa Group Network Airlines & CCO Hub Frankfurt; and Christina Foerster, Member of the Lufthansa Group Executive Board, Customer & Corporate Responsibility and former CEO of Brussels Airlines.

14

FRIDAY APRIL 17, 2020

THEBUSINESS24ONLINE.NET

F E AT U R E

THEBUSINESS24ONLINE.NET

FRIDAY APRIL 17, 2020

15

Could pandemic lead to famine?

BY MARTIN RAVALLION The huge health and economic shock that the new coronavirus is delivering to rich countries is also starting to reach deeply into the developing world.

But we should not presume that the rich world’s policy responses to the pandemic are best for developing countries, or even feasible.

On the contrary, we should anticipate sharper trade-offs and harder constraints in poorer places.

True, staying at home will most likely help to slow the spread of the virus in developing countries, just as it is doing in the rich world.

But social distancing can carry a high cost, especially for poor people, who have little savings and low food stocks, and depend heavily on (often daily) casual labor.

Few can survive by working from home.

This is not solely the familiar, cruel, trade-off between economic welfare and personal health that many poor people face. It is also a trade-off between two aspects of health: illness due to the virus, and hunger and poor nutrition resulting from economic isolation and disruption to markets and institutions, including private social protection.

While the case for a sensible degree of social distancing to combat COVID-19 in developing countries is strong, the case for a lockdown is not. Lockdowns pose new threats, and could even turn the pandemic response into a famine in some poor places. I do not say this lightly; I believe it is a looming threat. Both research and experience demonstrate how famines can result from the sort of institutional and market breakdowns implied by a strict lockdown. We saw this recently in the wake of the 2014 Ebola virus outbreak in Sierra Leone, where starvation soon emerged as a new threat.

Famine among poor and vulnerable people can result from multiple causes, as Amartya Sen demonstrated in his book Poverty and Famines. Sen cited examples in which there was no decline in the total amount of food available. The problem was its distribution among people and over time. And here, markets and other institutions play a crucial role. Lockdowns

can disrupt the production and distribution of food, alongside a collapse in poor people’s earnings and higher food prices. We are learning that today’s food supply chains have vulnerabilities, even in rich countries.

And even if famine is averted, spells of poor nutrition can have lasting consequences, including higher vulnerability to other illnesses.

There are additional reasons to be concerned that the push for lockdowns to combat the spread of COVID-19 could backfire in poor countries.

In the short term, imposing such measures produces large migration flows that threaten to spread the virus even faster, especially among poor and vulnerable rural populations.

And enforcement of lockdowns by the police and military raises further concerns for the welfare of poor people, who often will have the greatest need to leave their homes to acquire food for their families.

Above all, policymakers should recognize that strict lockdowns in developing countries also lock down the institutions that help to protect poor people in normal times, and thus enable them to avoid poverty traps that generally are shielded from view.

Lockdowns risk longer-term destitution, which may be hard to escape after the current virus threat has largely passed. The effects on today’s children are particularly worrying.

In the near term, a bold preparatory response is needed. To be effective, it must combine health-care efforts with consumption support.

The virus will put a huge strain on developing countries’ health systems, which even in normal times are often woefully inadequate, especially for poorer citizens. Indeed, the shortages of medical supplies, equipment, and staff now seen in the rich world are already familiar to people in lower-income countries.

Given that only so much can be done to bolster health-care systems in the short term, developing countries need an authoritative, independent communication channel on public health during the pandemic. Media messaging on the importance of social distancing and hygiene must be visible and frequent. Texting is a promising method of disseminating information and instructions, though the source has to be trusted.

Yet some developingcountry governments are pretending that the pandemic is under control, or that the threat is minimal.

These are dangerous delusions.

Democratic institutions have a vital role to play in ensuring the provision of credible public information, thus helping to avoid policy mistakes and enabling a rapid response. Viewed from this perspective, the current crisis cannot justify a turn toward authoritarian rule, which would most likely worsen the public-health crisis.

Consumption support through transfers will also be needed – in cash if food markets are working, and in kind if they are not. Lockdowns without support are far less likely to elicit broad compliance; forcing compliance can come at a huge cost to poor people. The health and support components are complementary and reinforce each other: food deliveries should come with soap.

Those countries that have been investing in social protection will be better placed than those that have not. Establishing new anti-poverty programs takes time, so developingcountry governments

should start by rapidly scaling up existing schemes.

This may well entail some temporary modifications such as removing work requirements and schoolattendance conditions, which run counter to the need to slow the spread of the virus.

Limited state capacity will also aggravate many developing countries’ challenges in combating the pandemic. Because public administration tends to be weaker in poorer countries, some of the measures that rich countries have introduced are simply not feasible. Adaptation to local administrative capabilities is essential.

Poorer countries also face tighter fiscal constraints.

Here, there is a strong moral and economic case for rich countries to help, including with debt relief.

They can help now or incur a potentially far greater cost later.

Martin Ravallion is Professor of Economics at Georgetown University and a former director of the World Bank’s research department.

Copyright: Project Syndicate, 2020. www.project-syndicate.org

16

F E AT U R E

FRIDAY APRIL 17, 2020

THEBUSINESS24ONLINE.NET

Ken Ofori-Atta: ‘What does an African finance minister do now?’

It’s 5am and I stir. My stomach feels cramped. I have slept no more than four hours.

My mind races. The problems cascade through. I hear the birds and do my meditation.

My wife Angie and I are in the middle of an Easter study on the Book of Daniel, and I can’t help but think of the writing on the wall: “mene mene tekel upharsin.” Have we been weighed and found wanting?

But I am optimistic there will be a few who will stand up and become modern-day martyrs, not only to defeat this pandemic but to create a new era.

On our minds is the question of surgical and N95 masks for healthcare professionals.

I make two calls to China to speak to our ambassador about ventilators, and another to Israel to a fellow from the Aspen Global Leadership Network about face masks, gloves and other forms of protection, and discuss a charter of a plane to bring these items to Ghana. Then a follow-up call to Vera Songwe, head of the UN Economic Commission for Africa, and Tito Mboweni, South Africa’s finance minister, to formulate our strategy for debt relief and commiserate on the downgrading of South Africa’s sovereign rating. Are the rating agencies beginning to tip our world into the first circle of Dante’s Inferno?

It’s time to go to work and I grab my made-in-Ghana face mask. First, though, we call Dad and Auntie Ellen. They are in their eighties and we can’t visit them. I drive into Accra, a strange and eerie feeling of apocalypse. Where are the schoolchildren, the women frying doughnuts, the newspaper sellers, the beggars? Where are our youth selling everything from dog chains to gum? The street supermarket is gone, replaced by police and military officers ensuring people stay at home. Our economy is over 90 per cent informal, and the informal market is in lockdown. Growth in GDP, which was projected at 6.8 per cent, could fall to 1.5 per cent, according to our projections.

How long can we sustain this?

I arrive at the office, park my car, wash my hands under running water in front of the ministry. My temperature is checked: 35.6C. It must be a good day. I am given hand sanitiser and go upstairs to my office. We are focusing on three priorities: presenting to parliament on the alleviation programme; a post-Covid-19 strategy for a more resilient economy; and a co-ordinated African effort to get support for international debt relief.

I look at the schedule for the

A staff member unloads Chinese medical supplies from an airplane at the Kotota International Airport in Accra, Ghana, April 6 2020 © Xinhua/Shutterstock

day with Michael, my special assistant, and it is almost surreal. We had had such a great start to the year with a landmark $3bn eurobond issue (whew! A lifesaver, as the markets are now closed).

In the past three years, we had successfully completed an IMF programme, brought inflation down and acted to ensure fiscal discipline. Then the Covid-19 pandemic struck, potentially wiping out 10-15 per cent of our GDP. The president was swift and decisive: requesting a $100m preparedness plan, ordering the borders closed, quarantining all airline passengers for at least 14 days and ordering mandatory testing. We also introduced social distancing, and closed schools, churches, mosques and places of entertainment.

The race was on for contact tracing, testing and treatment.

Economic activity has been massively disrupted; hotels are closing, industry is tottering, airlines are grounded, and our toast-ofthe-region airport lies asleep.

The Bank of Ghana cut rates by 150 basis points and reduced the reserve requirements by 2 per cent, enabling banks to increase their lending to the private sector by some $500m — a good effort, but an underwhelming response to what should be done. I need answers.

A U-shaped recovery is touted, but ours will likely be a steep drop, then a two- to

three-year downward slide before a recovery; a trapezoidshaped recovery!

Back to completing our schedule for the day. [Bank of Ghana] governor [Ernest] Addison and I finish Ghana’s application for the IMF’s rapid credit facility. However, Ghana and Africa desperately need fresh capital. We will work with the World Bank for a renewed approach. (I wonder what past bank heads such as [Robert] McNamara and [James] Wolfensohn would have been thinking at this time.)

We are interrupted by a call.

One of our major partners in the energy sector from Europe has triggered a letter of credit facility for $200m. I am outraged at such callousness.

I am reminded of the parable in Matthew where a man’s debt is forgiven, but he then finds the fellow servant who owes him and has him thrown in jail. I am now even more convinced that the African finance ministers’ proposal for a debt standstill and issuance and/or mobilisation of special drawing rights should be extended for two years and not be limited to low-income countries only.

So, what is the world coming to?

Extraordinary times, sobering times. Ghana, at the last count, had 636 cases and eight deaths. Analysis by the University of Ghana’s Noguchi Memorial Institute for Medical Research indicates that about four-fifths of the first 300

cases were direct imports; the virus’s genetic sequencing shows its origins are from Wuhan through Norway, the UK, Saudi Arabia, Hungary and India.

What does an African finance minister do now? How can we restore 10-15 per cent of GDP over a two- to three-year period? This is not a passing blizzard, as a friend said; more like a long winter, even a mini ice age. But there are some structural elements that need fixing; our health sector, digitalisation of the continent to formalise our economies; and Africa’s debt — the most controversial element and the topic of much discussion.

Africa’s external debt stock is more than $700bn. Africa needs to pay $44bn to service our debt this year.

The world is changing. The German chancellor doesn’t want to hear about debtto-GDP ratios. Unthinkable stimulus packages are being announced, trumping orthodoxies and with no talk of a moral hazard: the G20 packages may end up close to $8tn. Their generous tool kits are not available to us.

I am green with envy. To be honest, there is a lump in my throat as I think of Africa’s predicament. I question the unbalanced nature of the global architecture. I have, in one fell swoop, lost more than $1bn of revenue as domestic taxes continue to shrink, compounded by lost productivity and job losses.

We still have an obligation to service our debt portfolio.

These are grave times, surpassing the Spanish flu epidemic in 1918. Where is the leadership and global task force that would mirror the 1944 Bretton Woods monetary conference?

This unprecedented crisis has brought capitalism “to a juddering halt”, as Arundhati Roy wrote in FT Weekend. I think of Ben Okri’s poem [with the line] “Will you be at the harvest?” where he inspires us to remake the world for a new era through our human genius, so our future becomes greater than our past.

It is 1am. We have had a long day. We had to launch a sanitation campaign; we had video and teleconferences with [former UK prime minister] Gordon Brown, African finance ministers, the World Bank’s David Malpass and Kristalina Georgieva of the IMF, the Center for Global Development and the faithbased organisations — our partners in distributing food.

I have also been tested for Covid-19 and am anxiously awaiting the results. I am sleepy. I murmur through Psalm 23: “The Lord is my shepherd . . .”

Ken Ofori-Atta is Ghana’s minister for finance (Copyright The Financial Times Limited

THEBUSINESS24ONLINE.NET

FRIDAY APRIL 17, 2020

17

18

F E AT U R E

FRIDAY APRIL 17, 2020

THEBUSINESS24ONLINE.NET

Debt relief is the most effective pandemic aid

BY GORDON BROWN AND LAWRENCE H. SUMMERS

The nations of the developed world have responded to the COVID-19 crisis by supporting their domestic economies and financial systems in bold and unprecedented ways, on a scale that would have been unimaginable three months ago.

In contrast, when the world’s finance and central bank governors convene virtually this week for the semi-annual International Monetary Fund-World Bank meetings, steps will be taken to fortify the international system.

But nothing comparable to what countries are doing domestically.

Historians such as Charles Kindleberger have argued convincingly that it was a failure of international cooperation that made the depression of the 1930s “Great.” And even when there has been coordinated action in response to the crises that have occurred since, more often than not it has been taken after a huge human cost.

The Bretton Woods conference on reconstructing the international financial system came after the devastation of a world war.

The Brady Plan for resolving the Latin American debt crisis was agreed to only after the region suffered a lost decade.

The 2009 London G20 meeting on the global financial crisis, however, demonstrated the value of early and coordinated action to limit the damage to the global economy, maintain trade, and support fragile emerging markets.

The next wave of the COVID-19 crisis will occur in the developing world. Around 900,000 are likely to die in Asia, and a further 300,000 in Africa, according to grim, but perhaps cautious, estimates from Imperial College London.

While social distancing is the West’s route to suppression of the virus, the developing world’s crowded cities and often overcrowded slums make isolation difficult. Advice on hand-washing means little where there is no access to running water. Without a basic social safety net, choices are narrow and stark: go to work and risk disease, or stay home and starve with your family.

But if the disease is not contained in these places, it will come back – in second, third, and fourth waves – to haunt every part of the world.

Pervasive economic and financial failure in emerging markets also threatens the viability of the supply chains on which all countries depend. Given its magnitude, emerging-market debt

threatens the stability of a global financial system that is already dependent on strong central bank support.

And with emerging markets accounting for more than half of global GDP, global growth is threatened as well.

Just as the US Federal Reserve and other major central banks have expanded their balance sheets in previously unimaginable ways, the international community needs this week to do, in former European Central Bank President Mario Draghi’s famous phrase, “whatever it takes” to maintain a functioning global financial system. At a time when the United States is borrowing an extra $2 trillion to meet its needs, it would be tragic if massive austerity was forced on an already-stressed developing world.

First, the IMF, the World Bank, and regional development banks need to be as aggressive as the world’s central banks in expanding their lending. This means recognizing both that the current near-zero interestrate environment makes it possible to use more leverage than previously, and that there is little point in having reserves if they cannot be utilized now.

The World Bank nearly tripled its lending in 2009. An even more ambitious target may be appropriate now, along with a major increase in subsidized lending at a time when low borrowing rates in rich countries make it much less costly. In addition to relieving debt interest payments, the IMF, with its $150 billion in gold reserves and network of credit lines with central banks, should be prepared to lend up to $1 trillion.

Second, if ever there was a moment to expand the use of the international currency known as Special Drawing Rights (the IMF’s global reserve asset), it is now. If global money is to stay in balance with the domestic monetary expansion in rich countries, an increase in SDRs of well over $1 trillion is urgently needed.

Third, it would be a tragedy and a travesty if stepped-up global financial support for developing countries ended up helping those countries’ creditors rather than their citizens.

National debts incurred before the crisis must be at the top of the international financial agenda.

We should agree now that once we have clarity on the economic fallout of the crisis, we will pursue the kind of systemic approach required to restore debt sustainability in a number of emerging-market and developing countries, while safeguarding their prospects for attracting new investment.

But the most immediate and largest short-term support can come from waiving upcoming debt payments by the 76 lowand lower-middle-income countries that are supported by the International Development Association.

The current proposal is that creditor countries would offer a six- or nine-month standstill on bilateral debt repayment, at a cost of $9-13 billion. But this proposal is constricted both in its time frame and the range of creditors included.

We propose relieving over $35 billion due to official bilateral creditors over this year and next, because the crisis will not be resolved in six months and governments need to be able to plan their

spending with some certainty.

Here the role of China, which holds over a quarter of this bilateral debt, will be crucial.

China’s decision to be a longterm provider of funds for investment in developing economies has been welcome, and its spending has speeded the development of important infrastructure. Now is the time for China to play a leadership role with other creditors by waiving its debt repayments this year and next.

Nearly 20 years ago, when we both argued the case for debt relief for nearly 40 highly indebted poor countries, almost all the debt was owed to official bilateral or multilateral creditors and little to the private sector. Now, $20 billion – often borrowed at high interest rates – is due by the end of 2021 to privatesector creditors.

As recognized by the Institute for International Finance, which represents privatesector creditors to emerging markets, the private sector has to take its share of the pain. It would be unconscionable if all the money flowing from our multilateral institutions to help the poorest countries was used not for health care or anti-poverty measures, but simply for paying private creditors, especially those like the large American banks that are continuing to pay dividends at a time of crisis.

The ministers and governors convening this week should join their authority with that of the IMF and the World Bank to mobilize the private sector around a voluntary plan for addressing these debts.

Just as the pandemic can be contained most effectively and least expensively with bold early measures, the lesson from the past is that

international recessions and their consequent human costs are best addressed quickly and boldly. We must act fast and act together.

Gordon Brown

Lawrence H. Summers

Gordon Brown is a former Prime Minister (2007-2010) and Chancellor of the Exchequer (1997-2007) of the United Kingdom.

Lawrence H. Summers was US Secretary of the Treasury (1999-2001), Director of the US National Economic Council (2009-2010), and President of Harvard University (2001-2006), where he is currently University Professor.

Copyright: Project Syndicate, 2020. www.project-syndicate.org

THEBUSINESS24ONLINE.NET

FRIDAY APRIL 17, 2020

19

20 FRIDAY APRIL 17, 2020

THEBUSINESS24ONLINE.NET