Global fiscal response to the COVID-19 pandemic in the last 12 months according to the International Monetary Fund (IMF), has reached $16 trillion.
In its April 2021 Fiscal Monitor, the Bretton Wood institution notes that prompt fiscal responses by world governments have strengthened health systems and provided emergency lifelines to households and businesses.
Adding fiscal responses have mitigated severe contractions in economic activities.
It however, noted that the huge fiscal support along with drops in revenues has raised government deficits and debt to unprecedented levels across all country income groups.
According to the IMF, “Average overall deficits as a share of GDP in 2020 reached 11.7 percent for advanced economies, 9.8 per cent for emerging market economies, and 5.5 per cent for low-income developing countries.”
In Ghana, fiscal deficits on the account of the COVID-19 pandemic per data released by government increased to 11.7 per cent end-2020, from a previous deficit figure of 4.7 per cent in 2019.
The country’s debts as a percentage of Gross Domestic Product (GDP) witnessed an increment of 13.7 percentage points from a total debt figure of GHs 218 billion (62.4 per cent of GDP) in 2019 to GHs 291 billion (76.1 per cent of GDP) in 2020.
The Bretton Wood institution, however, notes that fiscal deficits in 2021 are projected to shrink in most countries as pandemic-related support expires or winds down and revenues recover.
Noting overall deficit is set to narrow in 2021 to 7.7 per cent of GDP to 4.9 percent in 2026.
In Ghana, the government anticipates a reduction in fiscal deficit from the current 11.7 per cent to 9.5 per cent by the end of 2021.
This is on the back of anticipated increment in the mobilisation of tax revenues for the year.
Despite the projected reduction in overall fiscal deficits across the globe, the IMF notes that uncertainty concerning fiscal outlook around globe is unusually high stating that, “The upside, faster-than-expected vaccinations could expedite an end to the pandemic, boosting revenue collections and reducing the need for additional fiscal support.”
“On the downside, a more protracted economic downturn, an abrupt tightening of financing conditions amid high debt, a surge in corporate bankruptcies, volatility in commodity prices, or rising social discontent could inhibit the recovery. In general, the longer the pandemic lasts, the larger the challenge for the public finances,” the IMF added.