Shifting Sands
Ghana missed the 1 November deadline for the International Monetary Fund (IMF) second tranche of the $3 billion bailout due to protracted…
Ghana missed the 1 November deadline for the International Monetary Fund (IMF) second tranche of the $3 billion bailout due to protracted debt negotiations with external creditors. The country failed to fulfil financing assurances, delaying the $600 million disbursement. Meanwhile, Organised Labour sought a 75% base pay increase in 2024 to address the escalating cost of living. On 13 November, they compromised on a 60% raise, while the government proposed a 15% increment in negotiations.
Ghana’s $3 billion IMF bailout programme is subject to semi-annual evaluations by the IMF through staff missions, followed by final approval by the IMF Executive Board. Disbursements under the programme are contingent upon the successful completion of each review. Ghana seeks to secure the necessary financial assurances before approaching the IMF Executive Board for approval and subsequent release of $600 million. This additional funding would bring the total disbursement to $1.2 billion by 2023 if all assurances are met. Finance Minister Ken Ofori-Atta emphasised that Ghana’s external sector’s performance will depend heavily on the outcome of negotiations with the country’s external creditors. He also reiterated that the Bank of Ghana’s policy focus will remain on increasing external buffers through sustainable means. The Ghana cedi is expected to maintain stability, supported by continued progress in implementing the IMF-backed programme, anticipated inflows from the cocoa syndication loan, the second tranche of the IMF loan, mining inflows and the central bank’s ongoing Gold-for-Oil Programme. Mr Ofori-Atta acknowledged that the main risks to Ghana’s external outlook include growing uncertainty surrounding geopolitical tensions and commodity price volatility. While authorities are working to increase revenue and create sufficient fiscal space in 2024 and beyond, key expenditure line items such as compensation for employees, including wages, salaries and other working conditions of service for public sector workers, continue to rise. In 2024, budgetary allocation to this line item is projected to surpass $6 billion. Labour’s demand for higher wages necessitated additional funding from Accra in 2024. In a record time of less than a month, the Ghanaian government reached an agreement with organised labour to increase the base pay of public sector workers by up to 25% in the 2024 fiscal year. Workers will initially receive a 23% increase in the first half of the year, followed by an additional 2% in the second half, bringing the cumulative increase to 25%. Labour initially sought a 120% increase, but later reduced their demand to 75%. Meanwhile, the government initially offered a 10% increase, which was later raised to 15%. After further negotiations, both parties reached a compromise, agreeing to a 25% base pay increase in 2024, taking into account expenditure constraints imposed by the IMF programme. This implies that a public sector worker with a current base pay of 3,000 cedis will earn 3,690 cedis in the first half of 2024 and approximately 3,750 cedis in the second half. An analysis of available data reveals that labour received base pay increases of 7% in 2022, 30% in 2023, and an agreed-upon figure of up to 25% in 2024. In all of these instances, labour received significantly less than what they had initially requested. In 2024, the government also agreed to increase the prevailing minimum wage from 14.88 cedis to 18.15 pesewas, representing a 22% increase. Despite the ongoing decline in year-on-year inflation, labour maintains that this new upward adjustment is insufficient to boost their disposable income. They have consequently urged the government to avoid delaying the implementation of the new base pay in the 2024 fiscal year.