Chief Executive Officer (CEO) of Dalex Finance, Ken Thompson, has given his plain diagnosis of the state of Ghana’s macroeconomy, describing it as frail.
Speaking at the CIMG-hosted event, Ken Thompson engaged in a hypothetical conversation with the Finance Minister, Ken Ofori-Atta where he sought to show that the cedi was overvalued using the Big Mac Index — published by The Economist to measure purchasing power parity (PPP) between two currencies.
According to the Dalex Finance CEO, the overvalued cedi made Ghanaian exports expensive and non-competitive, while imports were relatively cheap.
He notes that this development results in stunted economic development and unemployment.
Ken Thompson makes the case that the trickle-down effect of the overvalued cedi will jeopardize most, if not all government policies including the“Planting for Food and Jobs” programme.
He said the polices are likely to be non-competitive because of the overvalued cedi.
Ken Thompson argues that the state of Ghana’s economy started experiencing challenges since 2017.
“We spent almost 100% of all our revenue including grants on three line items as follows: compensation to employees, interest payments, and, statutory payments, example GETFund, District Assemblies Common Fund, and NHIS.”
Mr Thompson also raised concerns over the rise in government expenditure which he described as worrying.
“Since we spend over 100% of our revenue on these 3 items, all our other expenditure is done from monies borrowed. We are borrowing to fund consumption and not to fund investment.
“Our debt is piling up (70% of GDP), and, we may not be in a position to repay in future. Even before then, any natural or man-made disaster could send us into a default tailspin of government obligations causing intolerable hardship, widespread business failures, and mass unemployment,” he stated.
Touching on the solutions that the Finance Minister, Ken Ofori Attah, should take to rescue the “sinking ship”, Ken Thompson stated that increasing taxes and reintroducing property rates could deal with the issues of revenue generation once and for all.
“We are not likely to reduce our expenditure on salaries in the short term, and even though there has been some capping of statutory obligations the net effect is negligible. Our only hope is to increase revenue in the short to medium term in order to fund consumption expenditure,“ he stated.
He is, therefore, expecting the government to get the informal sector to start paying individual taxes, enforce evidence of tax payment on property registration, for example, vehicle registration, company registration, land title registration and increase taxes across board especially property taxes.
“That is our hope in the short term, and reduction in profligate spending, example stopping the purchase of numerous Toyota Land Cruisers that cost over GHC 600,000 each,” he admonished.