The Director of Research at the Institute of Economic Affairs (IEA), Dr. John Kwakye says government must accept responsibility for the economic outcomes during the 2020-22 fiscal year inspite of the strong macroeconomic indicators in 2023.
He said this at the IEA’s reflection on the state of the nation address delivered by President Akufo-Addo and Bank of Ghana’s monetary policy committee in Accra.
According to him, exogenous shocks especially COVID-19 and the Russia-Ukraine war impacted the economy against the backdrop of existing vulnerabilities compounding Ghana’s economic crisis.
“Government must, however, equally accept responsibility for the poor macroeconomic outcomes in 2020-22, which happened due to inappropriate policies, such as excessive spending, including numerous flagship programmes, and excessive and expensive borrowing,” he said.
He also reminded the government to fulfill its promise of moving economic policy away from ‘taxation to production’ which in his view, runs counter to what they have been practicing.
He asked the government to curtail its expenditure, including its size and numerous flagship programmes while urging that the fiscal consolidation being implemented under the IMF program has to be even handed and must fall equally on expenditure and not just taxes.
Commenting on issues in the energy sector, he said though the government has restored power and ended the popular ‘DUMSOR’ to keep the lights on in the last seven years, government should deal with the legacy debts to improve efficiency of the Electricity Company of Ghana and recruit expert managers given the inefficiencies in the current management of ECG.
On corruption, “If the OSP is to be successful in fighting corruption, it would be important to re-enact its Act and remove it completely from the influence of the Executive, in terms of appointment, prosecution of cases and funding”.
He further noted that Bank of Ghana’s Monetary Policy Committee (MPC) Policy Rate decision on interest rates in the country were prohibitively high and represent a drag on investment and growth where they are being artificially held up by a misplaced and misdirected monetary policy.
“It has to be pointed out that monetary policy is carrying an unnecessarily heavy burden in respect of macroeconomic adjustment because of pervasive fiscal dominance in the economy. The BoG has also not helped itself by heavily monetizing the deficit recently that fuelled demand and inflation pressures, which have necessitated its maintenance of very destructive Policy Rates,” he added.
