People’s QE in Ghana? One Economist thinks it’s time

Bank of Ghana

On the B&FT website this morning is a piece by Kofi Akuoko, an economist, on public-private partnerships. The part that really interested me was this:

Considering the broader ambit of economic possibilities available to any government however, is the GoG truly budget-constrained? If it would shift to exclusive local sourcing for construction work, would the constraint imposed by foreign-financing of infrastructure melt away in the face of available local-currency Keynesian and/or monetary stimulus?

In his classic formulation, Keynes envisaged government spending to stimulate a flagging economy being channeled through infrastructure building. It is instructive to note that he did not say the stimulus should be employed to pay civil servant salaries (as Zimbabwe did), or to settle debts (as Germany did after World War I). No. Proper Keynesian stimulus finances new economic value-creation. The building of new infrastructure involves real work by real construction companies, workers and machinery. It is not ‘more money chasing few (existing) goods and therefore driving up inflation. The new infrastructure in turn also permits additional value-generating activities that enhance the quantum of production (goods and services) available to be purchased by the increased money supply.

This article comes not long after another anti-austerity piece appeared on the same website. And, of course, the articles of Kwame Ofori Asomaning that got the whole discussion started also appeared there (here, here and here).

In my last post I supported the austerity programme based on the huge external debt (40% of GDP) which severely limits our options. But Mr Akuoko’s proposals may be able to fit into this programme. Monetary stimulus directed at infrastructure could help pick us up out of this low growth, high unemployment state we’re in while ensuring that the additional production accounts for the excess money supplied.

Mr Akuoko’s plan is fairly similar to the QE for the people developed by British tax reform campaigner, economist and accountant, Richard Murphy. This involves a national investment bank which invests in infrastructure with direct funds from the Bank of England. This is a way to go around the deficit and debt concerns from using normal fiscal stimulus.

People’s QE is not without it’s criticism, topmost is inflation concerns from the increase money supply, which would be truer for Ghana than the UK. It’s also contrary to the tightening which the BoG and foreign investors favour. But I think we could find a balance. Ensuring that projects are properly costed and competitively bided would be a start.

I still think the most important thing now is for the country to avoid a default. External debt is severely limiting the government’s policy options and so I think it’s important to reduce that. But when there’s an opportunity for growth, it has to be considered, especially as commodities show no sign of recovering.


Jerome Kuseh

Accountant | Economist-in-Training | Finance Blogger

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