The Institute of Economic Affairs (IEA) says the only way to improve the current cash constraints of the country’s economy, is for government to cut back on its spending.
The IEA is of the view that the economy is running low on cash mainly because, government’s spending is dangerously high and much of the spending is in areas which would not yield returns in the future.
Dr.John Kwakye, a Senior Economist at the IEA made these remarks on Thursday July 18, when he presented the Institute’s version of the State of the Ghanaian Economy to Journalists.
According to the IEA, while state revenues are not enough, donor disbursements are lagging yet government is borrowing more to make up for the slack in revenues.
Furthermore, the IEA notes that arrears to contractors remained unpaid and statutory funds such as the District Assemblies’ Common Fund, Ghana Education Service Trust Fund (GETFund) and the National Health Insurance Fund, are all not being paid.
The Institute is of the view that, these have come about because the country’s financial expenditures are too high. They say under the current circumstances, the country’s expenditure must be prioritised.
“The wage bill in particular has to be contained. This has to be done by cleaning up the payroll system and downsizing the public sector”, the IEA suggested.
According to the Institute, the cleanup of the public sector payroll system must start from the government sector which, they describe as “very large”.