Government Spending In Ghana

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1Background of the Study Government spending plays a crucial role in the day to day running of any economy and in fostering accelerated economic growth in Less Developed Countries (LDCs) (Ketema,2006). Government spending encompasses the expenses made by the government for the maintenance of itself and for the provision of public goods, services and works needed to promote economic growth and improve the welfare of people. It is also through spending that the government adopts various fiscal measures to ensure stability, stimulate economic activities and growth (Santiago and Gaobo, 2005). According to Blanchard (2007), government spending is the purchase of goods and services by the federal, state or local government and does not include government…show more content…
Capital expenditure includes spending by government or payments for the acquisition of fixed capital assets, land, stock or intangible assets. Good examples of government capital expenditure are building of schools, hospitals or roads. Capital expenditure has been widely viewed as spending that would reap future rewards, as there could be a lag between when it is incurred and when it actually takes effect on the economy. On the other hand, recurrent expenditure are government expenses on administration such as wages, salaries, maintenance, interest on loans among others. Trends in government spending for a considerable number of years, especially in developing countries and particularly Ghana, has been on the rise (Twumasi, 2012). These trends have been caused by rapid population growth rates and the general demands by the populace for improvements in their standards of living. In an effort to meet these demands, governments over the years have had to increase their spending. For example government spending as a percentage of GDP rose sharply from 20.8 in 1996 to 43.8 in 2008 (Twumasi,…show more content…
Many scholars support the idea that government should spend more as it puts money in circulation, increases investment and employment. On the other hand, some researchers are skeptical about the increase in government spending. For example when the state enters the market for factor inputs, it stimulates unhealthy competition with private sector firms for the same materials. Government will now become the biggest buyer of factor inputs to the detriment of the private

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