Ghana government reforms against external economic shocks
Dr Kwabena Duffuor, Minister of Finance and Economic Planning, on Wednesday said government was embarking on structural reforms that would enhance the economy to withstand externally induced economic shocks.
He said short-to medium-term measures which included enhancing revenue through improved tax policy and administration and the improvement of cash and expenditure management through the establishment of a Single Treasury Account, as well as improved budget management systems to contain the immediate impact of the global economic recession would be adopted.
Dr Duffuor announced these in a speech read on his behalf, at a forum organised by the Ministry of Employment and Social Welfare (MESW) in Accra.
The forum was to offer stakeholders in labour an opportunity to deliberate on the relevant conclusions reached at the 98th Session of International Labour Organization (ILO) Conference held in Geneva in June this year.
The issues included the global economic crisis and impact on jobs, new developments to combat the HIV/AIDS pandemic in the workplace, gender and employment in Ghana and labour standards and fundamental principles and rights at work.
Dr Duffuor said the global economic crisis that drove the Global Job Pact had some severe repercussions on Ghana’s economy, but the situation was showing significant improvement in stability and resilience as indicated in the recent Mid-Year Budget Review submitted to Parliament.
He said government intended to introduce public sector reforms to contain the fiscal burden of the public sector payroll and further reduce the fiscal risk of state-owned enterprises in the energy sector through a comprehensive financial restructuring of the Volta River Authority, Electricity Company of Ghana and GRIDCO.
The Finance Minister said government expected inflation to show significant moderation during the second half of the year as a result of the application of strong fiscal management and an anticipated good food harvests to enhance employment and build adequate social protection consistent with the Global Jobs Compact.
Dr Duffuor said government had shown its commitment to the reinforcement and enhancement existing social protection systems.
He mentioned the measures including a 50 per cent increase in the Capitation Grant from three Ghana cedis to four Ghana cedis 50 pesewas, making the textile industry the anchor of the implementation of the school uniform programme for basic schools in deprived areas and providing financial support for the youth indulged in the cultivation of food crops such as maize, rice, sorghum and soya beans.
“On the labour front, government has successfully negotiated wage settlements with the public sector and is working towards the implementation of the Single Spine Salary Structure in 2010,” The Minister said.
Dr Duffuor explained that prior to the crisis, Ghana’s economy had already been exposed to external economic shocks and periods of relative stability and steady growth were often interrupted by severe external shocks.
He said the impacts of these external shocks were sometimes compounded by poor domestic policies.
Dr Duffuor gave highlights of the situation in the past years, saying during 2000 to 2008, real Gross Domestic Product (GDP) growth accelerated rapidly from 3.7 per cent in 2000 to 7.3 per cent in 2008 on the back of a significantly expanded fiscal space, resulting from the Highly Indebted Poor Country (HIPC) Initiative and the Multi-donor Debt Relief Initiative (MDRI).
He said the fiscal space enabled government to undertake major infrastructure investments and targeted social spending which made reductions in poverty levels and other social indicators.
The Finance Minister, however, explained that Ghana’s joy did not last with the onset of hikes in global food and fuel price increases, which dramatically increased public sector spending, raising the fiscal deficit from 7.5 per cent of GDP in 2006 to 14.5 per cent of GDP in 2008.
“The global economic crisis further contributed to balance of payment pressures primarily driven by a dampening of export and remittance growth as well as a significant off loading of portfolio investments by offshore institutional investors who were dealing with a severe liquidity squeeze,” he said.
Dr Duffuor explained that the widening of the current account deficit from 9.9 per cent of GDP in 2006 to 19.3 per cent in 2008, showed up in a significant drawdown of reserves and a weakening of the cedi by 38 per cent against the dollar in 2008.
He said in the financial sector, there were indications that banks had been impacted indirectly through the impact of the melt down of the operations of many Ghanaian companies which were experiencing profitability and balance sheet pressures from a high cost of funds, a depreciating cedi, high inflation and a slowdown in exports.
“These second round effects have showed up in a slowdown in the growth rate of credit to 45.5 per cent for the 12-month period ending in 2008 compared to the 58.3 per cent recorded a year earlier,” he said.
Mrs Akua Ofori-Asumadu, National HIV Programme Coordinator, ILO-AIDS, speaking on the new developments concerning the HIV/AIDS pandemic, said designing policies to inform, educate and support persons with the disease, would go a long way to reduce the rate at which it was spreading.
She suggested that the ILO conference should adopt an instrument that would establish an international labour standard as a framework for action on HIV/AIDS in workplaces.
Mrs Ofori-Asumadu noted that though the disease was still weaving its way into the productive sectors of the economy, people seemed to be bored with further discussion and called for international standards to guide governments in designing HIV/AIDS policies and programmes for the various sectors.
She said the current “Know your status” campaign as emphasized in the workplace policy in Ghana, had yielded positive results as more and more people who were tested had been found to be positive adding “figures we never anticipated,” and encouraged operators of such programmes to keep up the good work.
Dr Yaw Baah, Deputy Secretary-General of Ghana Trades Union Congress, (GTUC), called for the full implementation of ratified conventions on labour in Ghana.
He said though Ghana had ratified about 57 ILO conventions, they were yet to be made practical for the desired results.
Dr Baah cited instances where employees had been sacked for exercising their constitutional rights to embark on strike actions or form unions to channel their demands to management.
He said such decisions reflected the poor labour standards in the country and considered hostile to the vision of unionization.
Dr Baah said a court order that supported the termination of employee appointment by employers without prior notice, were all unfair conditions that contradicted sections of the ILO convention on labour and should be critically re-examined.
He mentioned forced labour such as Trokosi, employers refusing to allow employees their due break, but forced them to work over the minimum of eight hours without break and reflected remuneration.
Dr Baah called for collective efforts from all stakeholders, backed by the political will of government to fully implement the ILO Convention on Labour.