CRISIS TO RECOVERY
STRENGTHENING ECONOMIC INSTITUTIONS IN
SUB-SAHARAN AFRICA DURING COVID-19
SPEAKING NOTES FOR IMF WEBINAR
DR. MAXWELL OPOKU-AFARI
FIRST DEPUTY GOVERNOR, BANK OF GHANA
JULY 22, 2020
Introduction
1. The global economy is going through extraordinary times, requiring even
more exceptional responses. Policy response has been swift and decisive in
many countries - first to secure lives, and, to reduce the social and economic
burden from the pandemic especially on vulnerable segments of the
population.
2. Massive fiscal support measures and strong supportive monetary policies
are being implemented in most countries to deal with the crisis. In
subSaharan Africa (SSA), most countries are confronting the crisis at a time when
they are confronted with limited or no fiscal space, a situation that has further
amplified their vulnerability. This has thus made external financial support ever
more critical at this point. The Fund and other multilateral institutions as well as
some bilateral partners have responded with massive financial support - a
commendable feat.
3. The pandemic is still evolving and for much of SSA the cases are surging
with considerable uncertainty about the magnitude of the effect of the
pandemic on in the region. Safely navigating the rapidly changing dynamics
associated with the pandemic for sustainable recovery requires maintaining a
careful balance between the concerns about zero tolerance for losing life and
high predisposition and tolerance for securing the structural pillars and
conditions necessary for supporting the living. A laser-sharp focus on the core
public health and related economic issues is important in this process.
Collaboration with the IMF
4. The feat achieved have been made possible with partner international
institutions and the critical role played by the IMF has been instrumental.
Capacity development with support from the IMF has played a critical role in
strengthening our policy frameworks and this will have to be acknowledged.
5. For example, the two policy institutions of state (Fiscal and Monetary
Agencies) have benefitted from technical support driven by AFRITAC WEST2.
Ghana is an intensive users of Fund CD and at the last check, Ghana has
benefitted on average around 20 percent of CD delivered annually by the IMF.
This is very high when viewed against the fact that collectively as a group
fragile states in the West African sub-region (Liberia, Sierra Leone, and The
Gambia) account for around 45 percent of CD received.
Fiscal Policy Support
6. The FUNDs Capacity Development support was instrumental in the formulation
of the Ghana Revenue Authorities' 3rd strategic plan which has helped stabilize
revenues through a TADAT diagnostic, audit and data analysis and evaluating
the integrity of the tax payers' database.
7. The passage of the PFM Act in 2017 with support from the Funds Capacity
Development support has greatly helped in creating an institutional framework
to help deal with the COVID-19 response.
8. This has led to a functional reorganization of the entire budget process,
strengthening cash management and establishing a framework for assessing
SOE risks, including publishing a fiscal risk statement.
9. The setting up of COVID-19 National Trust Fund and structures put in place to
make it operational in line with the law had its foundations in the PFM Act, an
Act that was developed with FUND technical input and support.
Monetary Policy Support
10. On the whole, monetary policy implementation has been bolstered by
enhanced analytical and supervisory frameworks which have allowed the central
Bank to take a long term view of policy options and have supported the decision
making process. They have helped created monetary space and have been
instrumental in helping dampen the impact of the shock.
11. CD also played a key role in strengthen Ghana's monetary and supervisory
frameworks. In the monetary policy arena, the main emphasis has been on
strengthening monetary policy formulation/implementation, communications
policy and developing a forecasting and policy analysis system (FPAS) to
support monetary policy analysis including through peer-to-peer learning. This
process is still ongoing
12. Banking supervision has also benefitted immensely. Over the past three years
such support has been directed towards, CD activities concentrated on
implementing internationally accepted best practices, adopting a risk-based
approach to banking supervision, and strengthening the banking resolution
framework to address vulnerabilities in the banking sector. Ghana has gone
through a process of financial sector reforms beginning in 2017. This led to the
closure of weaker institutions, resulting in a full sanitization of the entire
financial landscape and placing these institutions in a better stronger position
to deal with economic vulnerabilities.
13. The Amended Bank of Ghana Act, with support from the Fund helped provide
provisions avenues to allow the central bank trigger an asset purchase program
to address difficult times like these.
14 The space created by all these reforms enabled the BOG to provide timely
response to the pandemic. The MPC, as a result, announced several measures
to mitigate the impact of the pandemic shock, including lowering reserve and
capital requirements, revised provisioning and classification rules for specific
loan categories.
15 . Capacity Development efforts have also helped in data dissemination and timely
release of information has helped with investor perception on credibility of
policies. These have all been achieved with Technical support guidance from the
IMF.
Looking Ahead Towards Further Collaboration
16. The pandemic effects are still evolving and there is a high degree of uncertainty
in the global economy and it remains still unclear when the crisis will end and
when we can begin to think meaningfully of recovery. The road to recovery will
be a painful process and we need to think carefully through the following
issues:

Strengthening economic institutions to provide the necessary technical
support to economic policy making. This can be achieved through provision
of appropriate technical support. Effective collaboration with Fund and
Authorities to strengthen on ongoing capacity building programmes for
member countries will be essential. In particular, designing targeted online
programmes to deal with country-specific challenges in the current
environment will be important to support the policy process in these
challenging times.

By the end of the crisis, all fiscal space would have been depleted and debt
levels will rise. Redoubling efforts toward revenue mobilization will be
critical to generate the appropriate primary balances to bring down debt
levels to sustainable levels. Revenue generation will be also necessary to
create fiscal space, to address anticipated renewed demand for the
provision of public services to help support faster growth.
 The crisis has also shed light on the new for more reforms in critical sectors
of governments operations and further strengthening PFM frameworks in
accounting for the effectiveness in the delivery of COVID-related
expenditures. We understand that the Fund, sometime this week (July
2931) will be organizing a virtual workshop on how to record covid-19 related
policy intervention in Fiscal Statistics. These are all steps in the right
direction.
 In addition to financial support, a crucial element in this direction is
strengthening economic institutions to provide the necessary technical
support to economic policy making. In the current rapidly changing
environment and uncertainty, it is important that such policies remain well
focussed and one way of achieving this rests on the provision of
appropriate technical support. This can be achieved if the Fund and country
authorities effectively collaborate and strengthen the ongoing capacity
building programmes for member countries. In particular, designing
targeted online programmes to deal with country-specific challenges in the
current environment will be important to support the policy process in
these challenging times.
 It is also important to strengthen and implement reforms aimed at
dismantling bottlenecks in domestic revenue mobilization and
administration while undertaking legal reforms that ensure property rights
protection. Bureaucratic constraints in the delivery of government services
should as much as possible be removed to allow for maximum benefits
from government services. These processes will no doubt be critical going
forward for a sustainable recovery.

Decisive and clear assessment of each country's situation is even more
critical at this point to support policymakers. The Fund definitely has a huge
role to play in supporting member countries in this regard. Thus, supportive
human capacity building focused on harnessing local and international
expertise in the provision of strong policy advice and overall strengthening
economic institutions will be important to support sustainable recovery
process.
Thank you