Economist and Managing Director of the Ghana Growth Fund Company (GGFC), Kwame Ofori Asomaning has warned government to forfeit its austerity measures and spend to save the country form its economic woes.
According to him, the private sector relies on government’s expenditure to expand, hence any decision to undertake austerity measures will stifle the private sector from generating funds.
His comments follow government’s move to meet the International Monetary Fund (IMF) conditions, which among others require the government of Ghana to cut down expenditure to enhance fiscal discipline.
Speaking to Bernard Avle on the Citi Breakfast Show, Mr. Asomaning maintained that the private sector risks collapsing if government continues its reduction in expenditure while taxing businesses.
“Austerity has never helped any country, what austerity does is that it takes away money from the economy. The economy is individuals and businesses, and the economy is the private sector,” he said.
Mr. Asomaning argued that anytime government pursues austerity measures it cuts down on spending while increasing taxes, an economic move that has proven to be counterproductive.
He explained that the private sector always looks up to government’s spending since it is a major contributor to aggregate demand.
“Government is the sole issuer and the monopoly issuer of money. All money comes from government. It is through government spending that the private sector receives money and leverage on it,” he stressed.
He pointed out that the current austerity measures embarked upon by the government due to its aim of meeting the IMF conditions will rather make Ghanaians poorer.
“When you cut spending, you are restricting the flow of money from the economy. When you tax also you are taking money from the economy. In other words, you are sucking money from the economy,” he said cautioning that, “you will impoverish the people rather,”.
Making the private sector a pivot
Analyzing the three main sectors that are key in stimulating economic growth, Mr. Asomaning stated that the government sector, the private sector and foreign sector require good management to attain stability.
He stated that focusing on the private sector will not only expand the sector but have a multiplier effect that will lead to job creation.
“The government is supposed to build and support the private sector. If we are able to build the private sector very well, we will be able to get more jobs, create employment and improve the lives of our people”
Touching on the foreign sector, Mr. Asomaning argued that government always complains about external conditions affecting Ghana’s revenue due to the weak foundations of the private sector.
He was of the view that the economy can withstand any shock if government builds the private sector.
He stated that the due to unfavorable conditions Ghana is always in current account deficit.
“If our import is more than export, we will always be in deficit. That is what we call trade deficit or current account deficit. It is just like exporting dollars and importing goods and services into our country”.