‘Invest in productive sectors’ – Prof. Quartey urges government

Economist Professor Peter Quartey has urged the government to be mindful of the way monies borrowed are spent in the country.

He said the government needs to channel the monies into sectors that will become profitable amid the pandemic to keep revenue streams flowing to take care of the country’s needs.

“The fiscal space is very tight, but I see it as a temporary situation. If we can manage this very pandemic very well, we should get out of this tight fiscal space in the coming years. But that will also depend on where the government invests. Some sectors are very resilient in these times, and therefore if we invest in them we will be able to recoup and move out of this tight fiscal space and accelerate growth. Once the vaccines come and we can reduce the infections and eliminate it, the economy will bounce back,” he said.

According to a Statistical Bulletin report published by the Bank of Ghana in October 2020, the economy of Ghana is severely cash-strapped, making the government’s payment obligations more than 200 per cent of revenue that comes in, with no option other than resorting to borrowing.

The report shows that while total revenue from January to October 2020 was GH¢39.5billion, total payments which include interests on debts, wages and salaries, among others recorded more than GH¢80billion, representing 202 per cent of the revenue figure.

In an interview with the Accra-based Business & Financial Times closely monitored by GhanaWeb, Professor Peter Quartey stated that the high expenditure and the current state of the economy are due to the global pandemic COVID-19.

“We have always had challenges with revenue and expenditure, but it has been made worse with the coming of COVID-19. In terms of revenue, the borders were closed, some businesses closed down, and others had to defer their tax obligations, etc. When the country started recording cases, PPE had to be provided to schools and hospitals; frontline workers had to be given incentives, among other unplanned expenditure. In the past, these were not all factored into our expenditure. And given the situation we find ourselves in, one would argue that we need to save lives first and look at the way forward,” he said.

He explained that “All these led to decreased revenue. So, while revenue is being challenged, expenditure is going up. The question is, what options do we have? I think the only option in this situation is to borrow to fight the pandemic. We are not in it alone; many countries are facing similar challenges. We have a very tight fiscal space, and this has been made worse due to the COVID-19 and its related associated challenges on revenue and expenditure.”

Meanwhile, interest payment on debts for both domestic and foreign borrowing went up to the tune of 54 per cent of total revenue generated making the rest of government expenditure, including payment of wages and salaries and other commitments, to fall on less than half of the revenue generated in the country rendering the economy with no option other than taking loans to clear the remaining expenditure, soaring the public debt to GH¢286.9billion, which represent 74 per cent of GDP as at November 2020.