2026 Mid-Year Budget Review deserves more scrutiny, it’s difficult to see the economic case – Dr Nsafoah
He added that the relevant economic question is whether the return from moving Ghana’s reserves from an adequate level of around six months toward 15 months exceeds the return from roads, irrigation, energy infrastructure, hospitals, schools and other productivity-enhancing public investments.
Dr. Dennis Nsafoah, an Assistant Professor of Economics at Niagara University, has criticized Ghana's 2026 Mid-Year Fiscal Policy Review, arguing that the government's decision to redirect GH¢5 billion from capital expenditure to the Ghana Accelerated National Reserve Accumulation Policy (GANRAP) requires closer examination. The policy aims to boost international reserves to cover import cover for 15 months by 2028, a goal that Dr. Nsafoah contends is not economically justified.
The Mid-Year Review maintains overall spending levels while shifting the allocation from productive capital investment to reserve accumulation. Dr. Nsafoah, who serves on the Research Committee of Tesah Capital, pointed out that this decision deserves debate, especially in light of the IMF's recent staff reports. These reports indicate that Ghana's reserve adequacy is around six months of import cover, not 15 months as initially proposed.
The IMF explicitly states that a reserve level of 15 months would not be advisable purely from a precautionary standpoint due to its significant economic costs. Given Ghana's status as a commodity exporter prone to external vulnerabilities such as terms-of-trade shocks and capital-flow volatility, Dr. Nsafoah questioned why the government is pursuing a reserve target far exceeding the IMF's recommended threshold while simultaneously cutting back on capital expenditure.
Dr. Nsafoah emphasized that as reserves grow larger, their economic benefits diminish. While reserves offer protection against sudden capital flow reversals, commodity-price shocks, temporary export disruptions, and exchange-rate volatility, their advantages decrease as reserves expand. Moreover, resources spent on low-yielding foreign assets could be better utilized for higher-return domestic investments like roads, irrigation, energy infrastructure, hospitals, and schools.
In essence, Dr. Nsafoah contends that the economic trade-off between increasing reserves from an adequate level of approximately six months to 15 months does not hold up under scrutiny. He raised the crucial question of whether the returns from accumulating foreign reserves surpass those from investing in essential, productivity-enhancing public investments. Based on the available information, Dr. Nsafoah found it challenging to discern a clear economic justification for the government's chosen path.
Written by urgent.news from MyJoyOnline Ghana's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
