Macro Financial analyst, Mr. Kwame Ofori Asomaning, has advised government to concentrate on balancing the economy rather than balancing its budget.
In an exclusive interview with Today, he said government should not seek to balance its budget by taxing back all the monies issued, but rather, should balance
the economy since the budget and the economy are two different things.
“The economy comprises the public sector, the private sector and the external sector, where as the budget is about receipts and payments of the public sector or the government,” Mr. Asomaning explained.
“So if the government is only thinking about how to receive money in terms of taxes and spending it, then government will be leaving the private sector and that will have an effect on the private sector,” he warned.
According to him, taxes have special and unique reasons for which they were established and should not be the sole source of funding for government projects.
Therefore government must issue new money if it wants to fund any project because taxes should only come in after government has spent and not before, he advised.
Mr. Asomaning, who is also the Managing Director of Ghana Growth Fund Company Limited (GGFC), stressed that government’s spending should precede taxes and that if its sole thinking is to collect taxes from the people, that will create problems.
“Government should not collect all the monies back because most people like to save. And if government’s thinking is to collect all the monies from its citizens in the form of taxes, it will lead to problems such as unemployment because every money spent by government will be taken back and when that is done, the private sector [individuals and companies] will not have income,” Mr. Asomaning said.
He further stated that the lack of income in the system will affect sales which lead to private companies cutting spending and production cost, and that will ultimately lead to unemployment in the country.
“A lot of companies are folding up in the country at the moment because of these reason” he cited.
On what should be government source of funding other than taxes, Mr. Asomaning argued that the government of Ghana should only spend from the country’s main treasury account since its nature of doing business is only crediting accounts of companies whose service it engages.
He also stated that government’s spending should not be restricted by the fear of running into deficit and inflation since the two are not always bad.
He was, however, quick to admit that the current state of Ghana’s economy is as a result of the manner it was being run by those in charge.
“The reason why we [Ghana] are not developing is that we have been depending on outmoded economic theories and models and assumptions. We were under gold standard where we can only borrow or tax our people and in 1971, that standard was abolished by President Nixon. But when that standard was abolished, we did not change our way as Ghanaians and we carried those outmoded economic theories into the new era called the ‘FIAT currency ‘where the government can issue currency without constraints,” Mr. Asomaning narrated.
He attributed that phenomenon to the fact that the Ghanaian is only interested in reading text books rather than researching on new economic modules and putting them into practice.
Mr. Asomaning stated that government is failing to spend because of its quest to balance the budget and the fear of running into deficit.
He advised government to change the way the country’s economy is being managed since it is obviously not working to the satisfaction of the ordinary Ghanaian.
“My advice is that, if it is not working, let’s change it. It is not working because we can see the effect around us and hence the need to change it. Enough is enough” he declared.
<<Print>>