An Economist at the Institute of Statistical, Social and Economic Research (ISSER), Professor Charles Ackah, says calls for more expenditure cuts by the government are not the answer to Ghana’s economic downturn.
The government he said, rather needed to spend more by increasing its expenditure and pursuing sustainable development goals in order to regain the confidence of Ghanaians and spur growth.
He noted that if indeed austerity was the answer, Ghana would not have been in this dire economic situation considering how successive governments have been particularly thrifty with expenditure.
Speaking on JoyNews’ PM Express Business Edition, he said, “I don’t think the solution lies in fiscal consolidation. I don’t believe that at all because once you accept that it is fiscal consolidation we need then you’re saying that we have been profligate, we have been expending too much, and we need to cut down.”
He said “ I don’t think that is it because the evidence doesn’t support that. If you look at Ghana’s expenditure over the last 60 years, we’re not spending enough as the government expenditure is moving just around 10 per cent of GDP.
According to Prof. Ackah, successive governments have failed to adequately invest in grants and subsidies especially in comparison with other countries, thus, inadvertently thwarting development and making life difficult for Ghanaians.
He noted that these austerities have affected business growth, resulting in low revenues from taxes.
He explained, “Look at subsidies, the amount of money that government sends in terms of grants and subsidies to fertiliser to farmers, to LEAP and social benefits. In 2000 we were spending just about three per cent of our GDP or of our total expenditure, now it’s gone to just about 20 per cent. Malaysia is spending about 50 per cent, look at Belgium, look at all these countries, so which means that government actually is austere.”
The Economist suggested that the only way to get out of this quagmire was for the government to focus within and build local confidence.
“So how do we overcome recession? How do we make sure that we build confidence? The confidence is not supposed to be built for the external creditors, the confidence is supposed to be built rather for the Ghanaians,” he said.