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General News of Thursday, 2 July 2015


We’ll resist unreasonable increases in utility – TUC

The Trades Union Congress (TUC) has served notice that organised labour will resist unreasonable increases in utility tariffs and fuel prices and other such policies and measures that undermine improvement in the living standards of the working people of Ghana and their families.

“We would like to serve notice that the TUC, in collaboration with organised labour, will not allow a further decline in real wages,” it said.

The TUC also called on the government to address the governance and systemic policy failures manifested in pervasive corruption and impunity at the highest echelons of society.

This was contained in a statement signed by the TUC Secretary-General, Mr Kofi Asamoah, and issued in Accra yesterday at the end of the 33rd bi-annual meeting of the General Council of the union held in Tema on June 25 and 26, 2015.

It said the council discussed, among other issues, the prevailing economic, social and political situation in Ghana, with emphasis on the three-year IMF-sponsored Extended Credit Facility (ECF) programme and its implications for the working people of Ghana in particular and Ghanaians in general.

Economic and social situation

The statement said economic growth had slowed considerably and was expected to be around 3.5 per cent in 2015, the lowest recorded growth in more than a decade, while inflation was rising faster than projected.

It said for most basic products, the situation in markets showed far steeper price increases than headline inflation figures revealed, with the Bank of Ghana raising its policy rate, ostensibly to curb inflation.

“This has increased the cost of borrowing for domestic businesses, rendering most of them uncompetitive, even on the domestic market. The current account deficit remains large and growing. The national currency, the cedi, continues its downward slide against all major currencies in the world,” it noted.

It said those conditions had imposed excessive economic and social costs on Ghanaians, as jobs were disappearing as domestic companies folded up or reduced operations to stay afloat.

IMF bailout

The statement said in the midst of those challenges and after jettisoning the Senchi Consensus, the government turned to the IMF for “economic salvation”.
It said in doing so, the government recognised that it faced a credibility crisis and that it needed the IMF to fix that crisis.

“Foreign investors with short-term outlook will most likely be spurred on by the IMF programming to invest in short-to- medium-dated government treasuries.
But it is very unlikely for any investor to invest long-term in domestic production merely because of a three-year IMF bailout programme. Yet, Ghana requires long-term investment to grow the economy, re-balance the current account and strengthen the cedi and, most crucially, create decent jobs,” it noted.

The statement said the council held the view that Ghana could not develop on “borrowed credibility”, wondering what would happen when the programme ended in 2017.

“How will the current programme resolve the perennial fiscal irresponsibility that has become the hallmark of governments in Ghana? If past trends are anything to go by, then one would expect a return to the status quo where fiscal imprudence ushers this country into further fiscal austerity, with or without the IMF-sponsored programmes,” it stated.

It stated that the IMF bailout would not change the economic situation in the country, saying that in the last 16 years, Ghana had negotiated three different IMF ECF programmes, similar to the current programme, and over 40 technical assistance programmes.

“These programmes have failed to address the vulnerabilities inherent in the Ghanaian economy. This is explained partly by the fact that IMF programmes, by their very nature, are short-term and do not deal with the structural rigidities that cause the economic challenges they seek to address.

“Additionally, and as we have seen it around the world, the IMF is obsessed with fiscal austerity to the point that it has failed in its analysis to distinguish between cause and effects of the economic crisis currently facing Ghana,” it stated.

Public sector wages and employment

On IMF calls for a “frontloaded fiscal consolidation”, including a reduction in real wages, the statement noted that it was instructive to note that in all of Ghana’s programmes with the IMF, public sector wage cuts had been implemented as the immediate solution, regardless of the causes of the economic challenge.

“Wage cuts have become the centrepiece of IMF programmes. But public sector wages are not the primary cause of inflation in Ghana. If public sector wages were the cause of inflation in Ghana, then the wage restrictions (in terms of public sector wage/GDP ratio) imposed on Ghana by the IMF and the World Bank in the late 1990s would have curbed inflation during that period,” it said.

It said the IMF bailout also required a limit on net hiring into the public sector and hinted of a Civil Service reform, including retrenchment.

It said such reforms must not include retrenchment because that would be too costly nationally and to the affected workers and their families, in particular, given the precarious employment situation.

It said the significant deficits in public service delivery in Ghana were partly due to human resource shortfalls in some sectors and in some parts of the country.

On the negative effects of the recent increases in fuel prices on cost of living and businesses, the statement noted that as part of the IMF bailout, it was expected that subsidies on utilities and petroleum products would be fully eliminated.

“We find it extremely difficult to understand why the government would even contemplate further removal of subsidies and deregulation of fuel and utility pricing in the midst of such economic and social crisis. It is unacceptable for the government to deregulate fuel and utility pricing while restraining wage increases,” it stated.