A Senior Economist with investment firm, Databank, Courage Martey, has urged government to be cautious of its expenditure this election year.
He maintains that even though the Finance Ministry has shown the commitment not to overspend, there is the need to remind the government to stick to its plan debt management strategy.
Since the year 2000, governments have always overspent beyond their expenditure apart from 2004 when the John Agyekum Kufuor government was able to contain its expenditure in an election year.
Speaking at a Pension Conference organized by Axis Pension Trust, Courage Martey said government must keep to its commitment of controlling the country’s debt stock.
“The risks are there so we need to be cautious,” he said, adding that “we have reasons to be optimistic because we have seen that there is strong commitment to managing the risk”.
He pointed out that government’s commitment to maintaining a sustainable debt level is laudable and must be pressed on all state agencies to achieve the target.
“We would keep our fingers crossed and hope the fiscal reforms in the area of ensuring that the deficit does not overshoot what the law says, and the fact that the borrowing is also managed by the medium term debt management strategy, and the annual borrowing plan are followed through in 2020 and beyond.”7
Moody’s backs gov’t to break election year overspending cycle
Credit rating agency, Moody’s, has already backed government to halt the fiscal slippages that have characterized every election year since 2004.
The rating agency, in a press release issued in January 2020, revised the country’s outlook from stable to positive while affirming its long-held B3 rating.
The announcement means the rating agency is optimistic about the direction of the macroeconomic and its hopeful measures being taken will get better.
A positive outlook also lowers the risk of long-term debts that Ghana may issue over the medium-term such as the upcoming Eurobond to be issued next month.
With Ghana set to go to the polls in December, organisations such as the Economist Intelligence Unit (EIU) are predicting that the election-year spending will derail government’s fiscal consolidation efforts. The EIU, for example, is forecasting a 5.6 percent deficit.
Moody’s ruled that beyond the fiscal sphere, measures taken over the past couple of years to recapitalize the financial sector and to address the country’s power deficit (albeit the latter with problematic unintended consequences) also suggest active, moderately effective policy-making and support rising confidence in policymakers’ ability to sustain economic and financial stability, and to limit the risk of external shocks in the coming years. `
According to Moody’s, in recent years Ghana has seen a number of positive developments in key credit metrics, which partly reflect the institutional and fiscal reforms implemented under the four-year IMF program that was completed in April 2019.