The coronavirus pandemic has offered Ghanaians firsthand experience with macroeconomics theories, and reasons behind the government’s decisions.
The Expansionary Fiscal Policy describes a situation where the government spends more, cutoff, or reduce taxes, regardless of its budgetary surplus or deficit.
Thus, the government's interventions, distribution of food items to the vulnerable, full absorption of electricity bills, payment of water and sanitation bills for 3 months, tax waiver, transportation, allowance; for health professionals, soft loans to small-medium enterprises, to mention few, can be classified under this policy.
A government, pursue an expansionary fiscal policy, as a tool to stoke an economy into growth and to create jobs.
An expansionary fiscal policy is a powerful tool, it works short-term — a country can't maintain it for long.
Eventually, its budget deficit will become too large, driving up its debt to an unsustainable level — therefore, this policy is viewed as a short-term tool, not as a constant.
That's why governments implement expansionary policy during recessions and economic slowdowns rather than during times the economy is booming.
On the 9th of April, 2020, Ghana’s Parliament approved a Ghc 1.2 billion for the Coronavirus Alleviation Programme. Below, are the breakdown:
•Ghc 280 million allocated for food packages and hot meals
•Ghc 40 million to the National Buffer Stock Company
•Ghc 200 million will be used to pay for water bills and sanitation
•Ghc 241 million will cover tax waiver for health personnel
•Ghc 80 million as allowance for frontline health staff
•Ghc 2 million for health workers transportation
•Ghc 600 million disbursed as soft loans to businesses
In his famous words, the President, Nana Addo Dankwa Akufo-Addo Addo,
“We know what to do to bring our economy back to life. What we do not know how to do is to bring people back to life".
The government is doing all it can in combating the pandemic as well as maintaining the economy rather than ‘killing’ it.
Macroeconomics is very complex. The expansionary policy will increase outputs in the economy because of an increase in aggregate demand.
If the government reduces taxes, the theory assumes, individuals and businesses will use their tax savings to buy more goods and services, hence, more output and productivity.
As producers increase their productions and expand their operations, to meet the new demand, they will also hire new workers to support their growth thereby creating job opportunities.
Lifting the partial lockdown in Kumasi, Accra; Tema is a step in the right direction.
I urge Ghanaians to expedite the government's efforts against the pandemic.
The writer, Adu Richard, is a level 400 BSc. Agriculture student, Kwame Nkrumah University of Science and Technology, Kumasi.