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General News of Tuesday, 11 August 2020

Source: kingdomfmonline.com

Free water and electricity may be counterproductive – Economist

An Economist, Dr. Lord Mensah, says some of government’s social interventions such was the free water and electricity aimed at mitigating the impact of the Covid-19 pandemic, may come back to hurt the government if it does not tread cautiously.

Government earlier announced free water for three months, and 50 percent reduction in electricity and complete non-payment of electricity for lifeline consumers for April, May and June.

But the Finance Minister, Ken Ofori-Atta, in the Mid-year Budget Review announced the extension of free water to Ghanaians for another three months.

In the case of electricity, he said lifeline consumers will still enjoy it for free for the rest of the year, 2020.

Economist Dr. Lord Mensah believes government has to be cautious in extending these freebies to the general public as the move might slow economic recovery.

“You have put the money into the people’s pocket indirectly, at the end of the day is that the productive sector of the economy? That is why I said they have to be careful because it will get to a point where… Let’s add politics to the dynamics of what I’m talking about. Now by the time we get to three months from now, that is October, just about two months to the elections can you say you are going to stop the freebies when you’ve wet the appetite of the people? If you don’t take care, they can bounce back and hit against you.” he said.

On the contrary, Dr. Adu Owusu Sarkodie, also an Economist, says the subsidies are very practical government interventions under the circumstances.

“Consumption is part of GDP, consumption even accounts for the largest share of GDP. Last year consumption expenditure alone accounted for 65.8% of GDP. I don’t know why people will speak against consumption. Water, electricity, and the mobile phone we use are all part of consumption”.

“What the President has done is part of what we call the stimulus package. In many countries they do direct cash transfer. For instance, in the US, they distributed $1000 to every US citizen. In Ghana, if you attempt doing that, somebody may join one line and collect a thousand cedis, go to their home town join another and collect a second thousand cedis” he argued.

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