Economic advisor at Deloitte Africa, Yaw Appiah Lartey Esq., has urged the government—and successive ones—to reconsider Ghana’s expenditure patterns as a strategic step toward achieving long-term financial independence.
Ghana’s Finance Minister, Dr. Cassiel Ato Forson, has ruled out renegotiating or extending the country’s current program with the International Monetary Fund (IMF).
Speaking at a joint press conference with IMF officials in Accra, Dr. Forson emphasized the government’s commitment to implementing the program to restore macroeconomic stability and drive sustainable growth.
Reacting to this on Morning Starr with Naa Dedei Tettey, Mr. Lartey noted that while he wasn’t surprised by the government’s stance, a renegotiation with the IMF could have been helpful—especially given the global decline in development aid.
However, he called on the government to reconsider its expenditure pattern to achieve financial independence.
According to Lartey, Ghana’s current expenditure pattern is unsustainable, with 30% going towards compensation, 25% for interest payments, and 20% for subsidy payments, leaving only about 20-25% for supporting infrastructure and economic growth.
Lartey believes that Ghana should learn from countries like Malaysia, China, Russia, and the United Kingdom, which have successfully weaned themselves off IMF support.
These countries, he said, developed home-grown policies, invested in domestic production, and geared donor funds towards industrialization.
“……I tell people go and look at the list of countries that have historically relied on the IMF for a long time for their budgetary support and some of those countries who have weaned themselves off the IMF completely. A very good example is Malaysia. Malaysia historically was going to the IMF as often as Ghana was going and what did they do? They implemented some initiatives to wean themselves off IMF. Same as China, same as Russia, and even the United Kingdom. So with the exception of Argentina, all other countries that have successfully relied on the IMF in the past have weaned themselves, with the exception of Argentina, who keep going back there because obviously they keep mismanaging affairs and going back there. But what did these countries do?”
“The question you ask yourself. They developed their own home-grown policies, they adopted some initiatives. For instance, in Malaysia, there was a drive to encourage domestic production. Agricultural products, for instance, palm, a few other products that we took for granted. They invested so much in it, got a lot of support, and all their donor funds were geared towards industrialization. We (Ghana), unfortunately, are not doing that and if you look at the trend, you see that some of the borrowings that we get, we have support for current expenditure. Look at our expenditure pattern. 30 percent of our expenditure is compensation, another 25 percent is for interest payments, another 20 percent is for another subsidy payment. So your rule is about 20, 25 percent for other things, to support infrastructure, to support economic growth. If you run an economy like this, there’s no way you are going to wean yourself off IMF in the short to medium term. It’s a long-term thing.”
In contrast, Ghana’s expenditure pattern does not prioritize supporting key sectors like agriculture and industry, which are crucial for the country’s economic growth.
To break this cycle, Lartey recommends radically changing Ghana’s expenditure pattern to support agriculture and industrialization.
“So we should radically change our expenditure pattern, where there’s significant drive to support two sectors that are shrinking year on year, the agricultural sector and the industrial sector. If you are not supporting these two sectors and you are allowing services to control or to continue to drive an economic growth, you have a challenge, because the majority of our population are not as educated as the United Kingdom. So in the United Kingdom, the service sector drives the economy, because there’s a lot of literacy. Their literacy level is higher than ours. In our market, a large proportion or large number of our population is not educated. So what you do is you support agriculture, you support industrialization. That’s going to require a lot of skill as opposed to the service sector. If you are not implementing some of these policies, then you continue to go to the IMF, because it’s a vicious cycle.”
This, he believes would require developing policies that drive domestic production, investing in key sectors, and ensuring that donor funds are utilized effectively.
