President Nana Akufo-Addo has said his government is not freezing salary hikes for public sector workers for the next four years.
Speaking at the 11th quadrennial delegates’ congress of the Trades Union Congress (TUC) at Ejisu in the Ashanti Region on Tuesday, 23 March 2021 on the theme: ’75 years of TUC: Building a stronger union in a challenging world of work’, the President said: “Let me reiterate: the salary increment for public sector workers has not been frozen for the next four years”.
“He noted, however, that “the truth of the matter is that we are not in normal times and I appeal to all Ghanaians, including organised labour, to assist the government in this endeavour to have rebuild our public finances and economy”.
The President explained: “We need to mobilise additional resources to cater for the new challenges confronting us while meeting other statutory requirements”.
“I, therefore, urge all Ghanaian workers, to bear with the government in these unusual and rather challenging times. I’m confident that sooner, rather than later, and together we can create the happy, progressive and prosperous nation we all desire”, he said.
According to him, “COVID-19 resulted in a drastic slowdown in economic activity and a huge drop in domestic revenue combined with the sharp and [unparalleled] hike in COVID-19-related expenditure”.
“In sum, this unprecedented crisis, led to a sudden shortfall in government revenues amounting to some GHS13.6 billion and an unexpected and unavoidable rise in expenditure of some GHS11.7 billion”, he noted.
Last week, the Technical Adviser at the Ministry of Finance, Dr Samuel Nii Noi Ashong, said the government cannot offer huge salary increases to public sector workers for the next few years.
During a discussion on the 2021 budget organised by the Ghana National Chamber of Commerce and Industry (GNCCI), Dr Ashong said: “If you look at the budget, COVID-19 is not expected to abate until the end of 2023 and we’re all looking to be tightening our belts for a while and people should not be expecting huge wage increases in the course of the next few years. This is because we don’t have money to pay for it”.
“You’ll realise that between wages and compensations for employees and unencumbered domestic revenues, if you net off all the mandated transfers which are required by law, talk of GETFund transfers, National Health Insurance, District Assemblies Common Fund (DACF), the rest which is left is not enough to pay for wages and salaries, goods and service, social intervention programmes, that portion alone is not enough to pay for even wages and salaries,” he said.
He said if the government were to cater to all those demands, it “will be left with 40% in the hole and government would have to go and borrow to pay for that extra 40% plus goods and services and other commitments.”
“It is not a rosy picture and let’s call a spade a spade and so when people go on about saying we don’t need the taxes and government must give this and that, the reality is that we don’t have the money”, Dr Ashong added.
The government of Ghana’s total expenditure (including clearance of arrears) is projected at GHS113,750 million, equivalent to 26.2 per cent of GDP for 2021, caretaker Finance Minister Osei Kyei-Mensah-Bonsu told Parliament on Friday, 12 March 2021 when he delivered this year’s budget.
The amount “represents a growth of 13.7 per cent above the outturn of GHS100,052 million recorded in 2020”.
“Mr Speaker, wages and salaries are projected to amount to GHS25,799 million and constitute 22.7 per cent of the total expenditure (including arrears clearance) for 2021”, the Minister of Parliamentary Affairs said.
As a percentage of GDP, the wage bill is projected to be 5.9 per cent in 2021 compared to the 6.5 per cent recorded in 2020.
The Suame MP said the use of goods and services is also projected at GHS5,967 million or 1.4% of GDP.
It represents 5.2 per cent of the projected total expenditure (including rears clearance).
Also, he noted, interest payments are projected at GHS35,864 million, equivalent to 8.3 per cent of GDP in 2021.
“Of this amount, domestic interest payments will constitute about 79.1 per cent and amount to GHS28,368 million. Transfers to statutory funds as well as all other earmarked funds are estimated at GHS18,081 million (4.2% of GDP), representing 52.2 per cent growth over the recorded outturn for 2020”, detailed.
Capital expenditure is projected at GHS11,423 million (2.6% of GDP) in 2021, a decline of 5.5 per cent over the 2020 outturn,
“Of this amount, domestic financed capital expenditure is estimated at GHS3,310 million (0.8% of GDP)”, the lawmaker said.
Further, an amount of GHS8,112 million has been estimated for foreign-financed capital expenditure and this will be funded by a combination of project grants and loans.
On budget balances and financing operations for 2021, Mr Kkyei-Mensah-Bonsu said based on the estimates for total revenue & grants and total expenditure, the 2021 fiscal operations will result in an overall fiscal deficit of GHS41,298 million, equivalent to 9.5 per cent of GDP.
“Mr Speaker, financing of the fiscal deficit will come from both domestic and foreign sources”, he told Parliament, adding: “Net domestic financing will amount to GHS25,424 million (5.9% of GDP) while net foreign financing will amount to GHS15,870 million (3.7% of GDP) and will include a planned international capital market programme to raise up to US$5 billion, of which US$1.5 billion will be used to support the implementation of the 2021 budget and the rest for liability management”.
“Mr Speaker, a corresponding Primary deficit equivalent to 1.3 per cent of GDP, is also projected for the year”.