Overspending in 2024 election year could stifle economy for next 22 years – Prof. Mensah warns

Economist Prof. Lord Mensah has warned that overspending and burdening the country with more debt in 2024 could unsettle the economy for the next 22 years.

Speaking on the AM Show, he raised concerns that excessive budget overruns during election years, coupled with Ghana’s inability to raise long-term debt financing could derail economic gains under an International Monetary Fund programme this year.

In 2023, the Bond Market recorded a 57% year-on-year decline in trade volumes to ¢98 billion.

Also, restructured bonds have been undersubscribed following the Domestic Debt Exchange Programme.

Already, government has indicated that it will borrow ¢12.7 billion via treasury bills in January 2024, to finance maturing bills.

Prof. Mensah cautioned government against overspending ahead of the 2024 elections, pointing out that government’s resort to short term debt financing on the local market due to its inability to go to the capital market is already stifling growth in the private sector.

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”.

Prof. Mensah emphasized that, staying fiscally disciplined, and prioritising expenditure in 2024 will be crucial to the economic rebound of the country.

He warned that any attempt to embark on massive spending to please the electorates could force the government to spend beyond its budget.

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 said.

He urged government to do all it takes to secure the external debt exchange programme.

Ghana’s official creditors began meeting from January 8, 2024, to discuss the restructuring of approximately $5.4 billion in loans. This marked a critical step toward securing the next tranche of funding from the International Monetary Fund (IMF).