Economics lecturer at the University of Ghana, Professor William Baah Boateng, says that the government’s approach to managing expenditure, rather than drastic budget cuts, is a key factor behind the recent stability in the macroeconomic space, including the appreciation of the cedi.
Speaking on Joy News’ PM Express Business Edition on Thursday, May 8, Professor Baah Boateng dismissed the notion that Ghana’s improving exchange rate is the result of severe spending cuts. Instead, he argued that the improvement is due to strategic management of government spending.
“Government is not cutting expenditure,” he clarified. “We have to differentiate between cutting expenditure and managing expenditure.”
According to him, the current fiscal strategy focuses on ensuring that government spending aligns with productive economic activities, rather than indiscriminately slashing budgets.
“Government has tried to make sure that the expenditure it incurs will be supported by economic activity,” he explained. “This helps tame the fiscal side, which in turn benefits the exchange rate and the monetary side.”
Professor Baah Boateng added that this shift in fiscal policy has created more space for the Bank of Ghana to focus on its mandate without having to intervene excessively.
“The central bank will not be as concerned with clearing up the mess,” he said. “In 2022 and 2023, we were all saying that what is happening is coming from the fiscal side, and monetary policy would have to intervene to clear the mess. Now, if the fiscal side is putting its acts together, the mess won’t exist for the central bank to clean up.”
He praised the central bank’s cautious approach, calling it a wise decision. “What I see the central bank doing is watching and seeing how things are unfolding,” he noted. “No economy operates purely on supply and demand; there’s always some level of regulation.”
Professor Baah Boateng also emphasized that managing expenditure is about prioritizing government spending rather than reducing investment in the public sector.
“You may think that the reduction in the number of ministers to 57 is a cut, but there are many other ways the government is managing its expenditure. This is what we’ve been advocating,” he said.
However, he cautioned against interpreting the current exchange rate gains as a sign of fundamental transformation in the economy.
“When you look at the structure of the economy, it remains largely the same as it was last year,” he said. “What’s changed is the fiscal management.”
His comments were in response to earlier remarks from a GUTA representative, who welcomed the cedi’s appreciation and expressed hope for its continued strengthening. Professor Baah Boateng disagreed, advising that such optimism must be tempered with caution and discipline.
“I would be happy if the representative said that when the dollar weakens, they will reduce their prices accordingly,” he said. “But if this doesn’t reflect in the domestic market, we have to be very careful.”
The professor concluded with a broader economic principle: “There is no perfect market. No extreme monopoly. No economy works purely on demand and supply. There’s always some level of intervention.”
