Economist cautions government against overspending to satisfy voters

Dr. Daniel Anim-Prempeh, a Chief Economist with the Policy Initiative for Economic Development (PIED), has advised the government not to overspend in an attempt to respond to the demands of electorates.

He noted that overspending, particularly in this election period, could jeopardise the macroeconomic gains the country has made under the ongoing US$3 billion International Monetary Fund (IMF) loan-supported programme.

Speaking with the Ghana News Agency, in Accra, he noted that the country could also lose its credibility among creditors, and investors, and urged the government not to allow election-oriented demands make it spend outside of the budget.

Rather, Dr. Anim-Prempeh, encouraged the government to remain strictly within budget expenditure and policy measures for the loan supported programme, while boosting domestic revenue mobilisation.

“Although we’re recovering gradually, it’s not so firm. Any reckless expenditure will distort the macroeconomic environment and may even defeat the purpose of the IMF coming onboard to help us stabilise the economy,” he stated.

Dr Anim-Prempeh noted that because the ruling government’s desire is to win the elections and remain in power, it could be an avenue to execute some programmes, which are not even captured in the budget.

“For example, the running mate or a government official goes to a particular place and realises that they’re losing votes there and the only way to sway the people is to execute one or two projects, which may not have been budgeted for. This will cause overspending,” he said.

The Economist stated that such a situation could affect the macroeconomic gains made in the past few months, and urged the government to tread cautiously and not lose sight of the provisions agreed upon with the IMF.

“People are willing to invest into the country because of the presence of the IMF, which gives the country some credibility. If after the elections and the Fund is not happy with our review, it may distort investors coming onboard, and that may also affect our recovery agenda,” Dr Anim-Prempeh noted.

Meanwhile, the government has reiterated its commitment not to overspend in this election year, though Ghana’s election years in the Fourth Republic has been characterised with increased expenditure.

“As a government, we’re holding the line in this election year to avoid overspending,” Dr Mohammed Amin Adam, Minister of Finance said during the African Development Bank’s annual meetings in Kenya, in May 2024.

Madam Abena Osei-Asare, Minister of State at the Finance Ministry also told the Ghana News Agency in June that the government would default on reviews of the IMF programme.

“This year, we’ve had two successful reviews, and the next one is in November, and for us, we’ve worked consistently with every review, and that’s what we’ll continue to do,” she said.

On election expenditure, she said, “Consistently, we’ve kept to the programme because we know how this is important not just to the IMF, but to the people of Ghana, and we’ve said that in this election year, we’ll live within our means.”