'Fiscal discipline, not austerity – Economist explains cedi’s turnaround

Professor William Baah Boateng, an economics lecturer at the University of Ghana, discussed the government's spending strategy. He believes this approach is key to the recent stability in Ghana's economy and the appreciation of the cedi.

On Joy News’ PM Express Business Edition, he rejected the idea that drastic budget cuts caused these improvements. Instead, he emphasized managing expenditure effectively.

“Government is not cutting expenditure,” he stated. “We must differentiate between cutting and managing expenditure.”

He explained that current fiscal policies focus on aligning spending with productive activities. This helps stabilize fiscal conditions and benefits both the exchange rate and monetary policy.

Prof. Baah Boateng noted that this shift allows the Bank of Ghana more flexibility. “The central bank will not be as worried about clearing up issues,” he said.

In previous years, there was concern over fiscal and monetary policies needing to address economic problems. Now that fiscal management is improving, it reduces pressure on the central bank.

He praised the Bank of Ghana's cautious approach. “They are observing how things unfold,” he remarked.

He added that no economy operates solely on demand and supply; regulation is always necessary.

Managing expenditure means prioritizing government spending rather than completely withdrawing from public investment.

He pointed out that while ministerial positions have been reduced, other measures have been taken to manage spending effectively.

Prof. Baah Boateng cautioned against viewing current exchange rate gains as a sign of major change. “The economy’s structure remains similar to last year,” he noted, but there are positive developments in fiscal management.

His comments responded to a GUTA representative who welcomed the cedi’s appreciation and hoped for continued strength. Prof. Baah Boateng urged caution regarding such optimism.

“I’d be pleased if prices drop when the dollar decreases,” he said. However, if price changes do not reflect in local markets, caution is necessary.

In conclusion, he shared a broader economic lesson: “No market is perfect or purely based on demand and supply; intervention always exists.”