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Business News of Sunday, 20 February 2022


Expert advises against government cutting down expenditure despite challenges

Dr Adu Owusu Sarkodie, Economist Dr Adu Owusu Sarkodie, Economist

Cutting down expenses in economic slowdown not a good idea – Economist

Govt officials need to tone down on lavish lifestyles - Expert

Cut down unnecessary expenditures to salvage economy - Terkper

An economist, Dr Adu Owusu Sarkodie, has opined that suggestions made that government should cut down its expenditure are ill-informed.

Dr. Sarkodie was of the view that when a country's economic growth rate slows, it's advisable for government to spend carefully to avoid unnecessary risks.

His comment comes on the back of calls from a section of the general public and economists urging government to cut down its expenses to ease the burden on Ghanaians, especially in the wake of the proposed Electronic Transaction Levy.

Making his submission on Citi TV's 'Big Issue' programme on Saturday, Dr. Sarkodie said, “I have heard people advising government to cut down on expenditure. I see some of these suggestions as not well-informed. In the times of economic slowdown, you don’t advise government to cut down expenditure, but to spend prudently.”

“Besides, the expenditure we are talking about are very rigid in the budget. The compensation of employees, interest payments, statutory payments, can’t be cut, as they are backed by law. Doing this is cutting down capital, goods and services,” he further argued.

Meanwhile, a number of credit rating agencies have downgraded Ghana's creditworthiness.

Both Moodys Investor Services and Fitch Ratings have spelt out a grim outlook of Ghana's economy.

Rather damning of the ratings is that from Moodys which downgraded Ghana's long-term issuer and senior unsecured debt ratings to Caa1 from B3 and changed the outlook from negative to stable.

It said the new rating reflects the woes of Ghana in fixing its liquidity and debt challenges.

But a former finance minister, Seth Terkper argues that government cannot salvage the country's economic challenges through the E-Levy taxation.

Citing an example of some challenges in his tenure during the Mahama-led administration, Seth Terkper said the NDC government had to go back on its promise by constructing 50 E-blocks instead of 150 to enable it to channel its investments into other pressing expenditures.

He noted that it is a cue the current administration can follow.

But Dr. Adu Owusu Sarkodie noted that some of these expenses were necessary noting, “The example that is mostly given is the office of the president. Some of the projects like the free SHS, etc are under this office. If you advise government to cut down expenditure from there, you are advising it to stop free SHS, and One District, One Factory or you are asking it to relocate it to the sector ministries to be part of their budgets?”

The expert further said government officials will need to tone down on their “lavish lifestyles.”

“That is why I am advocating for prudent spending. Yes, if it will take government officials using already existing cars among others, yes we will have to do that. We can’t expect to burden citizens while they live in luxury. This is what I call prudent or efficient spending. Not cutting down on expenditure,” he said.