Banking Consultant Dr Richmond Atuahene and Data and Research Analyst Isaac Kofi Agyei have admonished the government to cut its expenditure by 30 per cent to effectively combat inflationary pressures.
The two in a report titled, ‘Thirsty Banks: Ghana’s 2023 Challenge with High Cash Reserve Ratios,’ raised several concerns including the government’s approach of “relying solely on traditional monetary policy tools like increasing commercial banks’ reserve requirements or adjusting monetary policy rates” aimed at addressing Ghana’s economic challenges.
“These measures have been excessively utilized in previous years and have become less effective due to the structure of the Ghanaian economy, which has developed a level of resistance to them over time. Bawumia (2010) affirms that the high level of reserve requirements (monetary policy instrument) reflects a legacy of high fiscal deficits,” the report said.
The report called for significant fiscal interventions in an attempt to alleviate the current economic difficulties which it said includes implementing substantial reductions in government expenditure by 30 percent.
“In addition to monetary policy adjustments, significant fiscal interventions are necessary to navigate the economic difficulties. This includes implementing substantial reductions in government expenditure to alleviate the current economic strain.
“To combat inflationary pressures effectively, authorities must proactively reduce central government spending by an additional 30%, with a particular focus on trimming down flagship programmes that have failed to deliver significant economic benefits since their inception.”
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