Economics lecturer at the University of Ghana, says government’s handling of expenditure, not deep budget cuts, is a key reason for the recent calm in the macroeconomic space, including the appreciation of the cedi.
Professor William Baah Boateng, speaking on Joy News’ PM Express Business Edition on Thursday, May 8, dismissed the idea that Ghana’s improving exchange rate is the result of drastic spending cuts.
Instead, he argued that the change comes from a strategic effort to manage where and how money is spent.
“Government is not cutting expenditure,” he said. “We have to differentiate between cutting expenditure and managing expenditure.”
According to him, the current fiscal posture is not about slashing budgets but ensuring that government spending aligns with productive activity.
“Government has tried to make sure that the expenditure it is going to incur will be expenditure supported by economic activity,” he explained.
“That helps in taming the fiscal side, and then its benefits go to the exchange rate and the monetary side.”
Prof. Baah Boateng added that this shift is vital in giving the Bank of Ghana room to breathe.
“The central bank will not be worried so much about seeing how they can clear the mess,” he said.
“In 2022 and 2023, we were all saying that what is happening is coming from the fiscal and monetary policy will have to come in and clear the mess. Now, if fiscal is putting its acts together, then it means the mess will not be there for the central bank.”
He praised the central bank’s current posture, calling it measured and wise.
“What I see the central bank doing is watching and seeing how things are unfolding,” he noted.
“There’s no economy that has demand and supply doing everything. There’s always some regulation.”
In his view, managing expenditure means prioritising what government spends on rather than withdrawing entirely from public investment.
“You may think, well, ministers have been reduced to 57. There are so many other things the government has done by trying to manage its expenditure. And this is what some of us have been talking about,” he said.
Prof. Baah Boateng warned against interpreting the current exchange rate gains as a sign of fundamental transformation.
“When you look at the structure of the economy, we still have the same structure as it used to be last year,” he said. “But something is happening in terms of the fiscal.”
His comments were a response to earlier remarks by a GUTA representative who welcomed the cedi’s appreciation and wished it would continue to strengthen.
Prof. Baah Boateng disagreed, saying such optimism must be tempered with discipline.
“I’ll be happy if he says that when the dollar goes down, he will reduce his prices accordingly,” he said.
“But if that’s not going to reflect in the domestic market, then we have to be very careful.”
The academics’ final note was a broader economic lesson: “There is no perfect market. No extreme monopoly. No economy works purely on demand and supply. There’s always some element of intervention.”
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