Economist, Dr. Adu Owusu Sarkodie, says government must necessarily spend to revive the economy following the Finance Minister’s presentation of the 2020 Mid-Year budget Review, during which he requested a supplementary budget of GHS11.8 billion cedis.
According to Dr. Owusu Sarkodie, with the severe economic impact caused by the coronavirus pandemic, this is one of the surest ways to bring the economy back on track in the medium to long-term.
The Finance Minister Ken Ofori-Atta, on Thursday presented the 2020 Mid-year Budget Review highlighting initiatives government has outlined to revamp various sectors of the economy hit by the COVID-19 pandemic.
He said the country’s total expenditures (including arrears clearance) amounted to GH¢46,352 million or 12.0 percent of GDP, compared with the programme target of GH¢41,554 million or 10.8 percent of GDP.
He thus requested for a supplementary budget of 11. 8 billion Ghana cedis, to support government’s expenditure for the rest of the year towards the implementation of various initiatives to strengthen the economy.
According to him, the double shock of the pandemic and a global economic recession, have resulted in a revenue shortfall of GH¢13.6 billion and unanticipated but necessary expenditures of approximately GH¢11.7 billion.
Among other things, the Minister announced new measures such as reduction in the Communication Service tax from 9 to 6 percent and the extension of free water supply to Ghanaians for the next three months and free electricity supply to lifeline consumers for the rest of the year.
There is also a GH¢100 billion Ghana Cares programme to transform and modernize Ghana in three and a half years, establishment of a GH¢2 billion Guarantee Facility to support all sectors of business and job retention, establishment of an Unemployment Insurance Scheme, the creation of a GH¢100 Million Fund for Labour and Faith-based organizations for retraining and skills development, and an increase the CapBuss Programme by GH¢150 million to, among other things facilitate credit of GH¢50 million to support the Creative Arts, the Media and the Conference of Independent Universities.
The Finance Minister also announced a review in GDP projection from 6.8 percent to 0.9 percent.
Dr. Adu Owusu Sarkodie told Citi Business News government’s prudent spending at this time is critical for economic recovery.
“I have not seen any economy that has been revived without spending. Every country must spend to revive its economy, it’s a must. Now, it’s time for us to spend to revive Ghana’s economy” he said.
Overall, Dr. Owusu Sarkodie says the Mid-Year Budget is welcoming and could lead to a recovery of the economy after the tumbling caused by COVID-19.
On Ghana’s debt stock, which is now GHS255.7 billion, as of June 2020, representing 66.36 percent of GDP, Dr. Adu Owusu Sarkodie says although it is worrying, using the monies prudently will serve a good purpose.
“Ghana government is borrowing from IMF, borrowing from World Bank, we have used the Stabilization Fund which was for this purpose, and then there is borrowing from Bank of Ghana, looking for about 10 billion cedis, and they already got GHS5 billion. So this issue of borrowing and public debt, there is no option; the Government must borrow and spend, but the concern here is about the judicious and efficient use of the funds.”
“If we borrow so much and we mismanage it, then there is going to be huge consequences for us in future. But if we are able to use it judiciously to put into key areas such as Agric, road construction, one district, one factory, help businesses to revive, then obviously the Ghanaian economy will be back on its feet. In the next two or three years, life will come back to normalcy and we will be able to raise enough funds to pay the loans”, he stated.