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The health of Ghana’s economy is in serious distress, after suffering two consecutive quarters of negative growth rates, says Kenneth Thompson, Chief Executive Officer of Dalex Finance Limited.
According to him if serious measures are not taken to reign in expenditure and ensure a stimulus injection of a whopping 5 billion dollars, the economy will soon crash or grind to a halt.
He said if government decided on a continuous borrowing trajectory, it could lead to the Ghanaian economy crashing, the effects of which would be heavy cuts to government expenditure, massive layoffs, unemployment, currency crash, and a low standard of living.
Mr Thompson who made the remark on Wednesday in an interview with the Ghana News Agency on the country’s economic prospects in the year 2021, “looking through the crystal ball” said Ghana stands to face grave economic challenges in 2021, if government does not adopt the right economic recovery strategy.
He said the Ghanaian economy was in recession after two consecutive quarters of negative Gross Domestic Product growth, adding that, the standard prescription for a recovery from recession was an economic stimulus package and yet Ghana was ‘broke’.
He said the only way the country could start to fund a half-way decent stimulus package in 2021 was either to borrow about five billion dollars on the international capital markets or the country must reign in expenditure and increase tax revenue.
Mr. Thompson said for Ghana to avert the risk of debt distress, it must reign in expenditure, increase tax revenue and also scrap programmes such as the Free Senior High School programme, NABCO among others.
“To reign in expenditure, projects that have made the government popular will have to be severely curtailed or cancelled. These include; Free SHS, free water and electricity, NABCO and payments to depositors with defunct financial institutions,” he said.
He described the solutions as a choice between the ‘devil and the deep blue sea’, saying, that was the situation President Nana Addo Dankwa Akufo-Addo would be facing either to borrow more or increase revenue mobilisation.
“Despite the rhetoric and the one hundred-billion-cedi Ghana Cares ‘Obaatampa’ programme, President Akufo-Addo, is facing a choice between “the Devil” and “the Deep Blue Sea” with respect to the economy.
“He faces the possibility of going down in history as the all-time ‘President of Public Debt’ or the ‘President of Austerity’,” he said.
He said the economic recession if not well managed would result in a spectra of high unemployment, reduced revenue collection combined with increased demand for stimulus packages.
“Businesses face reduced demand, revenues and profits. Customer defaults will rise and this will trigger staff layoffs and other unpleasant cost-cutting measures,” he said.