Cutting planned expenditure a good move – IEA

Business News of Friday, 4 August 2017

Source: citibusinessnews.com

2017-08-04

Eric Osei-Assibey

Institute of Economic Affairs (IEA) has downplayed any negative effect of government’s decision to cut down on its planned expenditure for 2017.

Finance Minister Ken Ofori-Atta announced on Monday during the mid-year budget review that government has reduced its spending slightly by 1.4 billion cedis from 203.41 billion cedis to 202.01 billion cedis.

Speaking to Citi Business News, a Senior Adjunct Research Fellow of the IEA, Dr. Eric Osei-Assibey was of the view that controlling the fiscal deficit is crucial to avoid slippages hence the move is in the right direction.

“The stability that this cutting brings to the economy is very important.

Imagine that government has gone on to spend, regardless of the revenue shortfall. Everybody will be on the neck of government, they would ask? Why are you spending more when your revenue is underperforming”, he explained.

He stated that going ahead to spend despite government missing its revenue target will put pressure on the budget and create a deficit.

“When you do that, you are widening the fiscal gap, and that would mean that you have to borrow more. But cutting it gives some confidence in government’s efforts to committing to fiscal discipline, and prudency. For me, that is the kind of confidence that will even engender the private sector to invest,” he observed.

Dr. Osei-Assibey stressed that it is important for government to practice sound economic policies that will enhance fiscal discipline.

Touching on other macroeconomic indicators in the budget review, Mr. Osei-Assibey was of the view that government is on track in achieving macroeconomic stability as most of the macro-indicators are moving in the right direction.

“The challenge however is the sustainability of these gains which means more needs to be done in— Aggressive domestic revenue mobilization, Expenditure controls, Ensuring Sustainable Debt management, and Achieving debt sustainability”, he said.

He added that it is important to accelerating growth for the base effect, as well as close the fiscal gap to reduce the fiscal gap effect.

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