Overspending in 2024 Could Lead To Prolonged Economic Crisis - Economist Warns

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(Prof. Lord Mensah)

Eminent economist Prof. Lord Mensah has sounded a cautionary alarm, indicating that excessive spending and an accumulation of further debt in 2024 could potentially unsettle Ghana's economy for an extended period of 22 years. While speaking on the AM Show, he expressed deep-seated concerns regarding the potential repercussions of substantial budget overruns during election years and highlighted the country's inability to secure long-term debt financing, potentially imperiling the economic strides made under an ongoing International Monetary Fund program.

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The dire economic landscape was further underscored by a noticeable 57% year-on-year decline in trade volumes to ¢98 billion within the Bond Market during 2023. Additionally, restructured bonds have encountered underwhelming subscription rates following the implementation of the Domestic Debt Exchange Programme.

Underlining the urgency of the situation, Prof. Mensah cautioned the government against excessive spending in the run-up to the 2024 elections, particularly emphasizing the adverse impact of resorting to short-term debt financing within the local market, effectively stifling growth in the private sector. His counsel emphasized the critical importance of fiscal prudence and strategic expenditure prioritization in navigating the economic challenges of the year.

With an awareness of the constrained financial landscape and limited access to international markets for funding, Prof. Mensah emphasized that a disciplined fiscal approach and judicious allocation of resources in 2024 would be crucial for steering the country toward economic recovery and sustained stability. Furthermore, he cautioned that any substantial surge in spending to cater to electoral preferences could potentially thrust the government into a scenario of budget overruns, further exacerbating the economic predicament.

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Expanding on the arduous nature of the fiscal constraints, Prof. Mensah emphasized the crucial need for the government to secure the external debt exchange program, recognizing this as a pivotal step in stabilizing the economic framework and fostering opportunities for progress.

The looming financial challenges were further highlighted by the ongoing discussions among Ghana's official creditors, initiated from January 8, 2024, to address the restructuring of approximately $5.4 billion in loans. These critical discussions mark an essential phase in ensuring the successful consolidation of the next round of funding from the International Monetary Fund (IMF).

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