Economist with Databank, Courage Martey has urged the government to be accountable in the quest to reap maximum impact off the interventions and cost-cutting measures rolled out to revive the economy.
The government has committed to further spending cuts amid the rising cost of living and growing sense of economic hardship.
These new measures will be in addition to the ongoing 20 percent expenditure cut as part of fiscal stabilization and debt sustainability measures.
Members of the Council of State also voluntarily cut their monthly allowances by 20 percent till the end of 2022.
In addition, the Ministry of Finance has said it has strengthened its Expenditure Monitoring systems and processes to ensure effective implementation of these measures.
According to the government, these moves are aimed at ensuring the 7.4% deficit target set in the 2022 budget is met.
Courage Martey, reacting to this development believes the government must do due diligence in the implementation of these initiatives to send the right signals to the market.
He noted, “The government was painstakingly announcing these cuts because these are cuts that you see being introduced in other areas other than what you find in the budget that you can relate to. So in the end, the market will only want to rely on accountability to see whether these announcements are reflecting in the fiscal numbers.”
“So we’ll be looking forward to the government being accountable in the July mid-year budget review because you can see that there is a commitment to manage and close expenditure but as to whether we can really place a finger as to how this impacts the general expenditure and how we can be sure that it has been done leaves a lot of questions.”
Pumping $2 billion into economy won’t solve cedi depreciation
Courage Martey also charged government to critically analyse factors that have led to the continuous depreciation of the cedi, and propose appropriate solutions to stabilize it.
According to him, pumping dollars into the economy to deal with the spiral downfall of the currency would not provide a lasting solution.
His comments come on the back of the decision by the government to inject an amount of two billion dollars into the economy as part of measures to tackle the economic hardship in the country.
“If you go by historical behavior of exchange rates, in the short term, we expect some positive impact because the situation we face today is a demand and supply imbalance. On the demand side, we’re seeing the Central Bank announcing a squeeze in cedi liquidity that should help cut the demand for forex over the weeks and months ahead.”
“The supply side should now be propped up by this $2 billion expected over the next six weeks. So that should help reduce the imbalance and in the short term, should help restore some stability. But if you extend the analysis period into the future, this definitely is not a sustainable way to keep the exchange rate stable.”
Mr. Martey then suggested areas that the government must focus on to solve the problem once and for all.
“We still would have to go back to the drawing board and look at how to anchor the cedi stability. Bringing down inflation is key so that there could be confidence in the value of the local currency. Also, improving on our exchange rates earning capacity. Central Bank’s gold purchase program is another. Increasing local content along the value chain of our extractive sector is another key way,” he explained.