Prof. Lord Mensah warns against 2024 overspending, citing potential 22-year economic setback
In a candid assessment of the economy, Prof. Lord Mensah has issued a stark warning that Ghana’s fiscal trajectory in 2024 could have profound ramifications, potentially unsettling the economy for a span of 22 years.
Prof. Mensah’s concerns center on the perilous combination of habitual overspending during election years and Ghana’s constrained ability to secure long-term debt financing. Such a scenario, he argued, could jeopardize the nation’s strides under the current International Monetary Fund (IMF) programme.
Highlighting the deteriorating state of Ghana’s Bond Market, 2023 witnessed a precipitous 57% year-on-year decline in trade volumes, amounting to a stark GHS 98 billion. Compounding the nation’s financial woes, restructured bonds have notably failed to garner adequate subscriptions following the Domestic Debt Exchange Programme.
The government’s interim solution appears to be a substantial borrowing via treasury bills, earmarked at GHS 12.7 billion for January 2024, intended to offset maturing bills. However, Prof Mensah cautioned against this approach, emphasizing that the resort to short-term debt financing is constricting private sector growth and exacerbating economic vulnerabilities.
Ghana’s diminished access to international markets further exacerbates the predicament, limiting avenues for substantial expenditure. Prof Mensah underscores the imperative for fiscal discipline and prudent expenditure prioritization in 2024, cautioning against populist spending measures that could precipitate a budgetary crisis.
“Access to the international market is not there to rake in expenditure like it used to be. If we overspend it will derail the economy for the next 22 years. We don’t have enough room to spend”.
“There is no room to raise the money that will call for the kind of election-year expenditure. It is not there, our hands are tied. If government has something to do, they may have to prioritise, other than that, bouncing back will be a problem”, he argued.
As Ghana’s official creditors convened on January 8, 2024, to deliberate on the restructuring of a substantial $5.4 billion loan portfolio, the nation stands at a critical juncture. Securing a favorable outcome from these discussions is paramount, as it represents a pivotal step in unlocking crucial funding from the IMF and charting a sustainable economic path forward.
