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Ghana wage overhaul needs rejig: minister

By on October 19, 2010

Ghana’s government may seek to renegotiate the timing of a public wage structure overhaul with labour unions to ease pressure on the economy, Finance Minister Kwabena Duffuor said on Tuesday.

Early this month, the IMF cautioned that Ghana’s debt position would be unsustainable despite the onset of oil output should the government of the West African state implement the new salary scheme set to be fully in place by 2013.

“The Single Spine Salary Structure is a real challenge for the economy,” Duffuor said in an interview. “It’s indeed a legacy that we inherited and in as much as we are determined and committed to its implementation, we must manage it in such a way that it would not undermine the economy,” he said.

The IMF warned that the public pay hike could add up to 2.5 percent of GDP this year and rise to 4 percent of GDP in 2011.

“We believe that if we (renegotiate the implementation period to five years instead of three), the pressure on the economy will not be unbearable. So we need to talk to labour leadership to revert to the five-year period as had been proposed initially,” he said.

Kwabena said Ghana had targeted a public deficit of 7.5 percent of GDP in 2011, from double-digits in 2008.

He added 2010 growth would come in above 6 percent, from 4.1 percent in 2009, with inflation remaining in the single-digits after 15 months of consecutive declines already.

Analysts expect double-digit growth from Ghana in 2011, after the country — already the world’s second-largest cocoa producer and a large gold miner — begins commercial oil production from its offshore Jubilee field.

“The economy is doing very well. Over the past two years, we have been able to weather the storm and (the economy is) headed for quite a remarkable growth of not below 6 percent,” he said. “Inflation will go down more and we may hit the Bank of Ghana 9.2 (percent) target by year end,” he said.

“My focus now is to make Ghanaians feel the gains of the economy and have hopes in the future that we are moving towards a diversified economy,” he said.

EUROBOND

Duffuor said the government also plans to replicate Ghana’s 2017 8.5 percent coupon Eurobond issued in 2007.

“It was very successful and is still doing very well — it shows that our economy is strong so we are working out the details to issue between $500 million and $700 million before the end of this year,” he said.

He said the government was in talks with Citibank, Standard Chartered and Morgan Chase for the new issue.

Debt arrears, meanwhile, were being successfully paid off, he said. The country had unsettled markets in August by announcing arrears inherited from the former government meant the end-2008 public deficit stood at 24.2 percent of GDP, almost double the previous estimate.

“We have managed to pay the arrears and yet inflation is going down; we have managed to pay the arrears and yet the currency is stabilising and becoming stronger and stronger every day, we are managing the arrears and yet still we are borrowing at lower costs. So yes, the arrears are there and they will be there but we’ll manage the economy,” he said.

He added that Ghana’s foreign reserves hit a record of $4 billion in September and would rise through the end of the year.

Reuters.

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