Professor Lord Mensah questions Ghana’s economic recovery amid 3.2% Q2 growth
Finance Economist, Professor Lord Mensah, has expressed reservations about the state of Ghana’s economy, arguing that it has not fully recovered from the challenges it currently faces. His comments came in response to claims that the Ghanaian economy had rebounded, particularly after posting a 3.2 percent growth rate in the second quarter of 2023.
During an appearance on “PM Express Business Edition” on September 21, 2023, hosted by George Wiafe, and discussing the topic of “Ghana’s IMF Programme Review and impact on the economy,” Professor Mensah shared his insights. He contended that the growth observed was largely driven by government spending rather than actual economic activities undertaken by businesses.
He emphasized, “What we are seeing now is that government’s spending is driving this expansion, for the second quarter of this year and not real economic activities undertaking by businesses.”
The growth figure in question was derived from data released by the Ghana Statistical Service for the second quarter of 2023. While some economic observers saw this as a sign of economic recovery, Professor Mensah challenged this notion, asserting that true economic growth would have positively impacted government revenue.
He also touched upon Ghana’s first IMF program review, indicating optimism that the country would pass the review and subsequently receive the second tranche of funding, amounting to $600 million. This infusion of funds, he believed, would help restore confidence in Ghana’s economy.
Furthermore, passing the IMF program review could potentially lead to additional financial support from international institutions such as the World Bank and the African Development Bank. Professor Mensah recommended that the government use these additional funds to influence interest rates, particularly for short-term papers, with the aim of reducing borrowing from the treasury bills market. This strategic move, he argued, could change the dynamics of interest rates, making it more favorable for businesses.
In line with this, he proposed that the government issue new bills with different interest rates to lower short-term borrowing, potentially encouraging commercial banks to lend more to businesses.
Regarding the re-opening of the Domestic Debt Exchange Programme, Professor Mensah expressed concerns about its potential impact on investor confidence and economic uncertainty.
Professor Lord Mensah’s analysis suggests that despite recent economic growth figures, the Ghanaian economy still faces challenges, with government spending playing a significant role in driving expansion. He emphasized the importance of prudent fiscal policies, particularly in managing government debt and interest rates, to promote sustainable economic growth and development in Ghana.
