Bloomberg News

Ghana Seeks to Curb Wage Burden on Deficit, Mahama Says

February 21, 2013

Ghana, West Africa’s second-biggest economy, needs to curb wage costs that are “squeezing out critical investments” after the budget deficit jumped to almost double the target in 2012, President John Dramani Mahama said.

Spending on civil-service salaries currently takes 60.9 percent of revenue after a pay increase for state workers, Mahama told lawmakers in the capital, Accra, today. In three years, the cost rose to 8 billion cedis ($4.2 billion) from 2.5 billion cedis, he said.

“Unless we tackle this issue decisively, we may soon reach a point where not much will be left to provide the much-needed roads, bridges, ports, schools, clinics and water infrastructure we need to develop our economy,” Mahama said, speaking in Parliament for the first time since his inauguration last month.

Wages, fuel subsidies and election spending widened Ghana’s fiscal gap to 12.1 percent of gross domestic product last year, compared with a 6.7 percent target, the Bank of Ghana said on Feb. 13. Mahama, whose government increased gasoline prices by 20 percent this week, pledged to raise the ratio of revenue to GDP to 20 percent from the current 16 percent.

The 54-year-old reiterated promises made during the campaign for the December vote to build 200 high schools, construct and upgrade hospitals, improve agricultural output and manufacturing and boost growth to at least 8 percent annually.

‘Growing Population’

“We will embark on an ambitious but realistic program of building new roads and bridges, expand electricity generation to energize our economy, increase access to good drinking water and quality health care for our growing population,” Mahama said.

The economy of the world’s second-biggest cocoa producer is forecast to expand 7.8 percent in 2013, outpacing the sub- Saharan African average for a sixth year, according to the International Monetary Fund.

Ghana is planning a pilot project in its impoverished urban communities to “combine social housing with improved sanitation and water supply,” Mahama said, without giving details.

Electricity shortages that have led to months of blackouts will probably end by April, when repairs to the West African Gas Pipeline, damaged off the Togolese coast in August, are complete and other power projects begin output, he said.

Ghana’s cedi currency, Africa’s third-worst performer against the dollar last year, weakened for a fourth day, falling 0.1 percent to 1.9075 per dollar by 2:28 p.m.

To contact the reporter on this story: Ekow Dontoh in Accra at edontoh@bloomberg.net

To contact the editor responsible for this story: Emily Bowers at ebowers1@bloomberg.net


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