Chief Executive Officer of Dalex Finance, Joe Jackson, has recommended that government consider paying contractors with tradeable bonds rather than cash, as a strategy to avoid exacerbating inflation.
Speaking on Joy FM’s Super Morning Show on Wednesday, 30th July, Mr Jackson cautioned that injecting large sums of cash into the economy without proper planning could have serious inflationary consequences.
“Any time payments are made, what you’re paying for will influence the impact it has,” he explained. “If you’re paying a contractor who is going to use that money to continue work, it has a very different effect from paying one whose project is already completed.”
He noted that payments for ongoing projects generate continued economic activity, while payments for completed works risk flooding the economy with money that creates little value.
“At the beginning of the year, arrears were up to GH¢64 billion. If you pump that directly into the economy, you’re going to get a huge inflationary effect,” he warned.
To mitigate this, Mr Jackson proposed that the government issue long-term, tradeable bonds to contractors whose projects have been completed and are no longer active.
“Let’s negotiate some sort of long-term payment. Give them bonds—bonds they can trade on the secondary market—so the money doesn’t go straight into the system and cause disruption,” he suggested.
While acknowledging that this approach may be unpopular among contractors, Mr Jackson stressed the importance of finding a pragmatic path forward given the country’s recent economic difficulties.
“The contractors are not going to be happy. But let’s be real, just seven months ago, we were in the throes of an economic crisis,” he said.
He further argued that contractors must be prepared to accept difficult but necessary decisions, pointing out that various stakeholders have already borne the brunt of economic reforms.
“Foreigners who gave us money have taken a haircut, domestic people have taken a haircut, and citizens have taken a haircut. Maybe the contractors should also accept a creative way that won’t please them but will help us move forward.”
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