Cleaning the public-sector payroll and eliminating costly fuel subsidies would generate GH¢160million in monthly savings for the government, a visiting International Monetary Fund (IMF) team has revealed.
The IMF has always insisted that public spending would become more efficient if the government’s payroll is better managed and excesses in the form of petroleum subsidies are eliminated.
Ghana’s public-sector payroll has often been found to be inflated by ghost-employees, and the government — despite several years of reform — has not been able to fully exorcise the “ghosts” from its books.
“The mission encouraged the government to accelerate the ongoing public payroll audit and discontinue payments to those not eligible, as quickly as possible,” said Christina Daseking, leader of the Fund’s team to Ghana.
“It further urged an elimination of costly subsidies on fuel and energy consumption, which benefit predominantly the higher income groups,” she added.
The cost of fuel subsidies has grown to GH¢60million a month, a government source told the Business & Financial Times, adding that the total cost in the first five months of the year has exceeded GH¢200million.
The higher price of oil and the depreciation of the cedi have increased the cost of importing crude oil into the country, but the government has kept retail fuel prices at levels set in late December 2011 (and further revised downward in February 2012).
“Both measures (cleaning the payroll and removing subsidies) together could generate monthly savings of about GH¢160million, which are needed to protect more productive expenditure and allow for an expansion of well-targetted social programmes to help the most vulnerable groups cope with the higher cost of living,” said Ms. Daseking.
An upward adjustment in pump prices would stoke inflation, which went up in April to 9.1%, the highest in a year, on account of the worsening exchange rate. The local currency depreciated by almost 17% against the dollar from January to May 2012.
Ms. Daseking said while the cedi’s depreciation is consistent with underlying economic factors, such as relatively higher inflation in Ghana and a high current account deficit, the pace of depreciation in recent months creates challenges for anchoring inflation expectations.
“Discussions with the Bank of Ghana (BoG) focused on policies to stem the recent decline in the cedi to defend the inflation target. The mission encouraged the BoG to maintain a tight policy stance to help stabilise the currency and achieve its inflation target, while gradually rebuilding its stock of foreign reserves,” she said.
On the government’s fiscal performance, the Fund said the otherwise strong performance in 2011, supported by an impressive improvement in revenue collection, met some challenges toward the end of the year and in early 2012. The fiscal deficit dropped to 4.3% of GDP in 2011 from 6.8% in 2010.
The government also reduced the stock of payment arrears by GH¢1.5billion last year, but the Fund said some spending obligations were carried over in 2012. The agreed 18% hike in public sector wages and the rising cost of fuel subsidies are new sources of spending pressures in 2012, it added.
“Discussions (with the government) focused on preserving fiscal discipline in the context of elevated macroeconomic risks and new spending demands,” Ms. Daseking said.
She said discussions will continue on “a few pending issues”, agreement on which will pave the way for her mission to recommend to the IMF Executive Board the completion of the sixth and seventh reviews of the Fund’s three-year stabilisation programme with the government.
By Leslie Dwight MENSAH
