Members of the public concerned that the new government’s extensive spending cuts could hinder growth and development can find reassurance, as a leading economist has dismissed such fears.
Senior Lecturer of Economics and Finance at the University of Ghana Business School, Prof. Godfred Alufar Bokpin maintains that the direction of the expenditure cut as directed by President John Mahama is largely in the interest of the economy.
Public concerns stem from the President’s recent directive to the Finance Minister, Dr. Cassiel Ato Forson, granting him unrestricted authority to drastically reduce government spending across ministries, departments, and agencies without exception. Dr. Cassiel Ato Forson has been given unfettered authority to “ruthlessly” minimize the budgets of ministries, departments, and agencies without fear or favour.
However, by simple and practical economic theory, one factor that massively drives economic growth is government expenditure. The spending of the government stimulates economic activities and hence enhances growth. With this, the directive appeared not to be in sync with the same government’s agenda to propel economic growth and expand the economy. This sent a signal of a government shooting itself in the foot.
But Prof. Bokpin says the directive is in the right direction since it is geared toward what he describes as “wasteful expenditure.” The economist maintains that a big portion of the government’s spending is very wasteful which does not inure to any economic benefits.
In an exclusive interview with The High Street Journal, Prof. Bokpin indicated that so far the government has shown leadership by banning all unnecessary travel and first-class tickets among his appointees. The cut in the size of the government is also laudable.
With these initial actions by President Mahama, Prof. Bokpin is convinced that the directive to the Minister for Finance will be geared toward other unnecessary spending. In his view, the directive if vigorously implemented will result in savings worth billions of cedis which can be channeled to productive sectors of the economy.
“The directive is in the right direction. We know that we’ve allowed considerable wasteful spending. If you take the appropriation act and you look at budgetary allocation to certain budget lines, for instance, Office of Government Machinery, so savings can be made from that,” the Economist explained.
He added: “Assuming you say that using 2024 as a base year and you reduce that by 50 percent, That’s a savings of more than 1 billion. The president had directed that all first-class travel be abolished. All travels must be cleared by the chief of staff. Opulence will not be tolerated. I believe that once the president signals that from the highest level and he has his ears on the ground to monitor, it would inform behavioral change and that will manifest in cost savings.”
Prof. Bokpin further mentioned that the directive to cut spending will not affect Capital Expenditure (CapEx) which is the main expenditure that drives growth, unlike the wasteful spending.
“We know that spending is good for stimulating growth. Yes. But wasteful spending actually detracts from growth. I am not expecting that this directive would affect substantially Capex. Capital expenditure, It should not,” he maintained.
The economist says the President’s announcement that he will set up a value-for-money committee to scrutinize also government procurements is a game changer in the country’s quest to cut waste.
