Public sector strikes test Ghana's deficit-cutting mettle

Tue Apr 16, 2013 9:17am EDT

Related Topics

* IMF has warned Ghana on ballooning wage bill

* Analyst warns deficit miss could rattle financial markets

* Doctors have suspended outpatient consultations

By Matthew Mpoke Bigg

ACCRA, April 16 (Reuters) - Oil-rich Ghana's effort to slow rampant public spending may be undone by middle-class professionals demanding that a generous, 2010 wage policy be implemented in full.

The strikes - by doctors, professors and pharmacists - pose the sternest test for President John Mahama since he took office in January and raise questions over the course of economic policy in one of Africa's hottest frontier markets.

Mounting pressure for generous public sector wage rises in the newly oil-producing nation could make it tougher for Ghana to meet its target of trimming its fiscal deficit to 9 percent of gross domestic product this year, from 12.1 percent in 2012.

The International Monetary Fund last week urged Ghana to control its "ballooning wage bill" after salary costs jumped 47 percent in 2012, an election year. A shortfall in oil production helped push the fiscal deficit to twice the forecast level.

Concerns over the high deficit prompted ratings agency Fitch to downgrade Ghana's outlook to negative from stable in February and have raised concerns among economists and investors.

"If we don't get everybody to understand this is not a question of power playing then the 9 percent the government has targeted for 2013 is not only not achievable but the financial markets will be rattled," said Joe Abbey, executive director of the Center for Economic Policy Analysis think-tank in Accra.

For decades, Ghana lagged behind its western neighbour Ivory Coast and regional giant Nigeria. Now it is attracting investors with a combination of oil, precious metals and cocoa, plus the political stability evidenced by successive peaceful elections.

However, the strikes come against a backdrop of energy shortages that have led to power rationing as domestic demand has boomed following the start of oil production in 2010.

After briefly appreciating early this year, the cedi currency has also resumed a gradual slide against the dollar , while inflation has ticked higher in recent months, reaching 10.4 percent in March. The yield on the government's benchmark 2-year bond has ticked up to just under 17.5 percent.

The Ghana Medical Association (GMA) union said its strike was not motivated by a deal-me-in mentality to Ghana's oil wealth, which came on stream in 2010. It said the government had failed to properly implement its own salary review policy.

"Government has no respect for doctors and for healthcare delivery," said GMA president Kwabena Opoku-Adusei. "When it is work they say: 'It is an essential service'. When it is salary they say: 'It doesn't matter'."

POUND OF FLESH

Union sentiment has been hardened by a recent decision to award members of parliament a hefty pay increase and by revelations of massive spending on elections last year.

Both factors make it harder for the government to hold its line in the face of union demands, according to the opposition National Patriotic Party (NPP).

"Now everybody is demanding their pound of flesh," said former minister and NPP communication director Nana Akomea.

Public sector doctors suspended outpatient consultations, the union said, causing hardship in a country of around 25 million whose medical system is already stretched.

"I'm not in favour of the strike but if it will make the government pay attention then perhaps they have to go on with it," said Anita Afonu, an independent film maker based in Accra.

The strikes are rooted in government efforts to tackle disparities in public salaries in line with the 1992 constitution and to keep talent from joining the private sector.

In 2010, Ghana began a five-year migration of 480,000 public servants onto what it called the Single Spine Pay Policy. Police were the first group to switch and received a 240 percent rise because they were one of the most underpaid groups.

That fed expectations of comparable windfalls for others.

"The issue is that (the government) probably did not manage the public expectations properly," said George Smith-Graham, chief executive of the Fair Wages and Salaries commission.

The GMA said there are around 3,000 doctors who rank among the elite of Ghana's civil servants and merit a market premium payment. A senior medical specialist doctor earns around 5,000 cedis ($2,500), according to the wages commission.

The Ministry of Information last week said the strike was illegal and urged unions to abide by the decisions of the government's National Labour Commission and return to work.

Talks on Friday between unions, the wages and labour commissions and government representatives made progress, the Secretary General of Ghana's TUC, Kofi Asamoah, told Reuters.

Pay and pensions for doctors in Ghana is low by international standards, driving many to emigrate to the West.

"The young ones look at the old ones who have retired and they don't want to go that way," Opoku-Adusei said, adding there were many examples of respected doctors who "died like paupers".

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