General News of Wednesday, 10 April 2013
Source: Daily Graphic
The Minister of Finance and Economic Planning, Mr Seth Terkper, has stated that the current industrial unrest could have dire consequences for the country’s economy, if labour remains entrenched in its demand for immediate lump sum payments.
According to him, the government could not immediately pay the outstanding public sector allowances without borrowing.
He, therefore, pleaded with labour unions to consider their actions on the national purse and accept the payment of their allowances in three tranches in May, July and September.
The government has been saddled with multiple industrial actions from labour unions due to claims of unpaid allowances especially with regard to market premium.
Speaking in an interview with the Daily Graphic, Mr Terkper said a lump sum payment of all outstanding allowances to workers on the public sector wage bill would present dire consequences for the economy.
“We cannot pay now without borrowing, and if we borrow to pay, it will have dire consequences for the economy and it will drive interest rates up,” Mr Terkper said.
Already, the country’s private sector had complained of excessive government borrowing, which it offers at fat yields on Treasuries and bonds to lure investors, which tend to crowd out local businesses of credit for business expansion.
Between January and December, last year, the yield on the government’s three-month treasury bill rose from under 11 per cent to more than 23 per cent, drawing investors to the bills but depriving the private sector and increasing the government’s debt-servicing costs.
This, the Finance Minister said, would present serious consequences for the country, if the government continued to borrow to pay up salaries and allowances of the public sector.
Giving a breakdown of the government’s tax revenue, Mr Terkper said the Ghana Revenue Authority (GRA) in 2012 raised GH¢12.5 billion including oil receipts of which GH¢7.2 billion was used in settling public sector wages and salaries.
He said this year, government expects the GRA to collect some GH¢17 billion including oil receipts of which it projects to pay GH¢7 billion on wages and salaries.
The Finance Minister was even more worried that the huge wage bill occasioned by the implementation of the Single Spine Salary Structure had crowded out the fiscal space for spending on critical social intervention and other infrastructural programmes.
“Last year was a difficult fiscal year and continual borrowing to pay the arrears will cripple us because you are depending on borrowing which comes with interests. Hence the need for stake holders to come to some understanding to avoid lump sum payments”, he emphasised.
Admitting payment challenges, Mr. Seth Terkpeh highlighted liquidity issues, particularly, for the first quarter of 2013, which he attributed to a difficult fiscal year of 2012.
Economists have largely attributed the difficulty to the depreciation of the cedi with its rippling effect.
The cedi suffered losses of more than 17.5 per cent against the dollar in the first half of 2012, before the Bank of Ghana moved in to halt the fall till year end.
The Finance Minister stated that government would ensure that the Single Spine Pay Policy applied to all Ministries, Departments and Agencies which were fully or partially on government budget, except those exempted by the constitution or an Act of Parliament.
He, however, expressed confidence in the economy and hoped that it would overcome its initial challenges.