Prof Eric Osei Assibey
PROFESSOR ERIC Osei Assibey, Associate Professor of Economics at the University of Ghana, has advised government to take stimulate the economy through the provision of stimulus packages to businesses that are likely to suffer production in these trying times.
According to Prof Assibey, government must carefully target some key industries, particularly, those that were export-oriented and were likely to be affected by the global shock.
“Now what government can do is to stimulate the economy. Monetary policy and fiscal policy can come together to provide some kind of stimulus package, largely making credit accessible to businesses that are likely to suffer challenges,” he said in an interview, Thursday.
“The cost of credit should come down and it has to be easily accessible to them besides the stimulus package,” he added.
Prof Assibey also said government could also explore the possibility of tax deferrals and tax incentives for the affected industries, so they could retain staff in order not to worsen the situation.
He commended the Central Bank for the bold initiative of reducing the policy rate by 150 basis points to 14.5 per cent from 16 per cent and also reducing the primary reserve requirement of banks from 10 per cent to eight per cent.
He said the reduction in the policy rate also provided the Bank of Ghana the opportunity to close the gap between inflation and the policy rate, which had remained high despite the low inflation environment.
“We are not going to see more sell-off of our bonds because the situation out there is worse so it is an opportunity to reduce the yield on government bonds to close the gap between inflation and the monetary policy rate,” he stated.
“This could trickle down on lending rates for businesses to get affordable credit to cushion industries.
“COVID-19 has led to slow growth in demand in crude oil across the globe, especially in China, and that has led to the tumbling of prices currently around $30 per barrel,” he added.
Noting that the low crude oil prices was going to affect revenue inflow to government as the benchmark price in the 2020 Budget was pegged around US$60, he noted, “Significant revenue is going to be lost and that can impact substantially on government’s ability to provide and execute the budget.”