The proposed $300 million Economic Governance and Poverty Reduction Credit (EGPRC) from the World Bank, we are told, aims to support the Ghanaian government’s three-pronged efforts to restore budgetary discipline and tackle long-standing public sector and energy issues, while protecting the poor. Efforts supported by the EGPRC concentrate on measures to:

1. establish a treasury single account, improve compliance with the public procurement law, correct any budget deviations (fiscal deficit, pro-poor expenditures) through new fiscal measures, publish fiscal accounts, and submit to Parliament the Freedom of Information Bill;
2. reconstitute the boards of energy related utilities and regulatory authority, adopt an electricity sector financial recovery plan, adopt draft legislation on the Ghana Petroleum Regulatory Authority and oil and gas fiscal regime, implement a net hiring freeze in the public sector, eliminate ghost workers in health and education services, classify half of subvented agencies in preparation for their rationalization, divestiture, or commercialization;
3. extend the number of LEAP beneficiaries and review the effectiveness of pro-poor expenditures by revising their classification.

The Government strategy, as Ghanaians have begun to fill, comprises immediate actions in 2009 to restore control over expenditures, by keeping a cap on the numbers employed in the public sector, keeping wages below inflation and removing subsidies on utilities. While the Government of acclaimed Social Democrats say, “In 2009, the reduction of investment expenditures, the containment of wage and other recurrent expenditures, additional grants and low oil prices will largely contribute to reduce the deficit,” efforts to reduce the deficit is also going to hurt the Ghanaian worker and their families. Indeed, the World Bank document covering the loan admits, “In 2009 and 2010 income poverty could rise further, as per capita private consumption growth is expected to fall.” In other words, the World Bank is telling Ghanaians that they are going to get poorer in the next two years. In the next two years, it is estimated that “an additional 500,000 people [will fall] below the poverty line at US$1.25 a day, assuming unchanged income distribution.” The World Bank says this “underlines the importance of protecting vulnerable households from the downturn in economic activity through targeted measures, such as a further extension of the cash transfer program (Livelihood Empowerment Against Poverty, LEAP) to new beneficiaries and the protection of pro-poor public expenditures as the budget contracts. Additional channels affecting poverty stem from the increase in the relative price of food and energy as a result of the anticipated exchange rate depreciation.” So, is this the better Ghana that Ghanaians voted for? The NPP government continues to be accused of leaving a huge fiscal deficit. But, the EGPRC document tells us what brought about that deficit: “The recently widening of public deficits stems principally from four sources: (i) a loss of control on expenditures related to their very fast pace of growth in the period leading to the 2009 elections; (ii) a sharp increase in the wage bill, which went up from 8.5 to 11.3 percent of GDP between 2005 and 2008.” It also cites the “(iii) the rapid rise in one-off investments financed with Eurobonds to increase generation capacity in response to the electricity crisis of 2006-7; and (iv) large subsidies to the electricity sector amounting to over 1.2 percent of GDP during 2008.” So, really, should President Kufuor be lambasted for such humane and important development efforts for his country? As Nana Attobrah of the Danquah Institute has remarked, the NPP in the last two years gave the biggest salary increments in real terms to public sector workers like never before in the nation's history. "In real terms salaries went up by 40 percent from 2006 to 2008. That is remarkable by any standard. Indeed, the figures reveal that from 2003 to 2008 teachers and others in the education sector saw their pay going up by 10 per cent every year in real terms. This means for every one of those years even after discounting increases in prices of consumer goods and services, the Ghanaian public sector worker had 60 percent more money to spend in actual terms." Indeed, President Kufuor paid public sector workers 25 percent higher than their counterparts in the private sector, especially with unionised staff! And, yes, we are told teachers, police officers, nurses and others voted in their numbers against the NPP. Well, now we have President Mills and what does he offer? A 17% percent increases in public sector wages, this week, while he is targeting an annual average inflation of 15%, and analysts fear inflation may end the year at 19%! God bless those who voted for a better change. They must have hope because change may soon come even if it takes almost four years. Credit: Asare "Gabby" Otchere-Darko Executive Director Danquah Institute 3 Dadebu Close Nyaniba Estate, Osu Accra, Ghana Tel: +233 21 782878 +233 21 769385/6 +233 21 771371 Fax: +233 21 782906 +233 21 771373 Cell: +233 26 4314312 +233 28 4314312 +233 24 4314312