Government’s spending cuts are cooling economy and squeezing demand – Bokpin

Economist Prof Bokpin asserts that government's heavy reliance on spending cuts is cooling the Ghanaian economy and reducing demand. Speaking on Joy News' PM Express, he points out that while this approach is restoring macroeconomic stability, the benefits will take time to reach ordinary citizens. He explains that shrinking aggregate demand helps bring down inflation, but it also restricts the economy's supply capacity.

This assessment comes ahead of the 2027 Budget presentation to Parliament on November 12. The government aims to transition from stabilization to investment, job creation, and higher incomes through its New Economy agenda. However, the Minority has questioned the program's financing and demanded an account of existing flagship programs due to weak sales and concerns over the disparity between falling inflation and rising household living costs.

Prof Bokpin emphasizes that the 2026 Budget continues to depend heavily on spending restraint, similar to the strategy used in 2025. He warns that Ghana's infrastructure needs make extensive spending cuts particularly challenging. He argues that government spending is crucial to address growth constraints. Prof Bokpin points to examples such as long travel times on poor roads, highlighting the disconnect between improved economic indicators and the immediate impact on ordinary Ghanaians.

Despite the progress, he acknowledges that the approach to restoring macroeconomic stability will take time to reflect in the lives of the Ghanaian people. He credits the government for achieving falling inflation, interest rates, reserve accumulation, and the cedi's relative resilience despite renewed pressure, crediting the administration's stated priority for the first two years.