Economist Alarmed At Gov’t Borrowing

Dr Eric Osei-Assibey

Dr. Eric Osei-Assibey, a Senior Economics Lecturer at the University of Ghana, Legon, says government’s untamed borrowing escapades were soon going to leave the economy with severe economic migraine.

According to him, allocations in the recently approved budget for the first quarter of 2017, for example, showed interest payments took a chunk of government revenue, a situation which he said pushed the economy into further distress.

He raised fears that the winner of the December 7 presidential polls faced an arduous task of fixing the economy.

The GH¢10.9 billion approved by Parliament last week is expected to finance “critical government expenditure” in the first quarter of 2017.

Finance Minister, Seth Terkper, made the request to the Finance Committee of Parliament in line with Article 180 of the 1992 Constitution and Section 23 of the Public Financial Management Act, 2016 (Act 921).

Some GH¢1.8 billion has been earmarked for interest payments; grants to other government agencies will cost GH¢2.3 billion, while compensation and salaries to government employees take up GH¢3.8 billion.

Speaking on Tuesday in Accra, Dr. Osei-Assibey, said he hoped that government cut down on its expenditure, especially when revenue figures did not match spending.

“Knowing that you are not really earning more, the economy is really not expanding, you do not embark on expenditure that do not have a direct bearing on productive sectors of the economy, otherwise you worsen the situation,” he said.

He said the rate at which the country was borrowing; a high inflation could be triggered with serious repercussion on all the other macroeconomic figures and businesses.

“Like we are paying about GH¢10 billion this year alone, that is about 30 percent of the total expenditure. So if you are paying about 30 percent on debt servicing and you are paying about 40 percent for salaries and wages then how much is left for capital expenditure? That is where this economy finds itself now,” he lamented.

He advised that if the economy continues to be run like that, an expansion would be severely stifled.

“It wasn’t surprising that the IMF came out last time to revise our growth projection for the year from about 4 percent to 3.5 percent this year, which is one of the lowest we have recorded in many years,” he said.

 

Myjoyonline

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