Ghana’s Budget Deficit Target Under Threat Amid Strikes

Ghana risks missing its budget deficit target this year as thousands of doctors and teachers strike to demand higher pay in West Africa’s second-biggest economy, according to Databank Financial Services Ltd.

Services at state hospitals have been disrupted since April 8 after more than 3,500 doctors and pharmacists stopped work to demand higher allowances and back pay. The once-off payment amounts to about 9 percent of basic salary, Frank Serebuor, general secretary of the Ghana Medical Association, said in a phone interview today from the capital, Accra.

The government is struggling to narrow a budget gap that soared to 12.1 percent of gross domestic product last year, almost double the 6.7 percent target. Finance Minister Seth Terkper has pledged to curb the deficit to 9 percent this year as Ghana faces the threat of a credit-rating downgrade.

“If government is pushed to spend anything outside the budgetary limit then the deficit will exceed 9 percent of GDP,” Sampson Akligoh, head of research at Accra-based Databank, said in an interview yesterday.

Ghana has more than tripled the wage bill for civil servants to 8.54 billion cedis ($4.4 billion) between 2009 and 2012 as it raised salaries to bring parity to pay grades. Wages are equivalent to about 68.2 percent of government tax revenue, according to the budget statement.

Doctors are currently only attending to emergencies and won’t resume work until their wage demands are met, Serebuor said.

Inflation Threat

Terkper told the state-owned Daily Graphic newspaper on April 10 the government can’t afford to raise doctors’ pay without increasing borrowing.

Fitch Ratings cut its outlook on Ghana’s B+ rating to negative from stable on Feb. 15, concerned by the deterioration in the budget deficit.

Higher wages also threaten to boost inflation and undermine the currency. Consumer prices rose 10.4 percent in March from a year ago, the fastest pace since May 2010, the statistics office said on April 10. The cedi has dropped 2.2 percent against the dollar this year and was trading at 1.9475 as of 11:27 a.m. in Accra.

University Teachers Association of Ghana, which represents 3,300 lecturers, called off a two-week strike on April 15 after agreeing a pay settlement with the government, the union’s national president, Anthony Simmons, said yesterday.

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