Public Agenda (Accra)
6 July 2009
editorial
Accra — For the best part of last week, the entire country was engaged in a long and divisive debate over the World Bank's approval of a $535 million loan for Ghana. The loan is part of a long term package of $1.2 billion the Bank has agreed to give the Government to restore the fiscal imbalance and create a stable economy.
Wrapped up in the $535 million is a $300 million component for Economic Governance and Poverty Reduction Credit. It has just come to light (see front page report) that the $300 million is not a free lunch after all.
According to the agreement between the Government and the World Bank, the Government is supposed to put a freeze on net hiring in the public sector, except for teachers, nurses and doctors as part of the condition for securing the $300 million loan from the International Development Association (IDA) , the lending arm of the of the World Bank.
The immediate repercussion is that the number of public sector workers which currently stands about 600,000 will not increase, at least for the next two years. Instead, replacement of staff can only take place in the case of death and those retiring.
The virtual freeze on employment is in sharp contrast with the National Democratic Congress' (NDC) manifesto which boldly states the government's readiness to create jobs for the teeming unemployed youth. Unofficial figures indicate that as many as 60,000 new graduates are turned out of our tertiary institutions each year onto the job market.
As things stand now and unless the Government can stand up to the World Bank's conditionality, the unemployment situation is going to get out of control. Already the Government has put a freeze on the employment of fresh police and military personnel this year, which could have added to about 2,000 fresh recruits.
What is worrying is that our private sector is not too strong to absorb the chunk of unemployed youth the public sector might not be able employ as a result of this conditionality. The reason is that we have over the years paid lip service to the development of the private sector.
While the terms of the loan are not that bad, the conditions attached will severely reduce growth and job creation; besides maintaining low wages and reducing government expenditure and subsidies on social amenities.
One thing that must be pointed out is that no country can have a strong economy when about 60% of your budget is footed by "development partners.
We cannot run away from the fact that we have an economy that is weak in manufacturing and agricultural output, an economy that creates a situation where between 12-15% of total income is used to service debt payment. We have an economy whose currency is losing its value against the major currencies each day and interest rates are as high as 30%, making it difficult for business to invest and moreover when the vast majority of its citizens live on less than $3 a day.
The concern of this newspaper is the unavoidable creation of unemployment as a result of this new World Bank conditionality. That said, the Government must prove it can take up the challenge in these trying days of the economy. The onus is on the government to prop up the private sector by ensuring low interest rates for investors and potential investors, especially fresh graduates who want to go into new ventures.
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