Ghana not so golden: Government salaries threaten economic growth

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Ghana, a country of 27 million on the west coast of Africa, called the Gold Coast when it was a British colony, has been in recent years one of the few stars of African economic and political performance.

Government employee pay, which ate up 70 percent of government revenues in 2012, may now be threatening Ghana’s status. Its economy had averaged an impressive 6 percent growth in recent years, achieving 4.4 percent last year.

However, earlier this month Ghana was forced to ask the International Monetary Fund for help. Its currency had fallen a third against the dollar since January. Public debt had soared to over 50 percent of gross domestic product. Its budget deficit hit 10.1 percent last year.

The IMF does not provide free help and will impose conditions that will be painful for Ghanaians, who have been riding high in recent years, including with fuel subsidies and lax tax collection. The IMF’s normal prescription for economic healing includes a ceiling on public debt, a civil servant pay freeze, a limit to subsidies, and perhaps privatization of some government services.

All of this will be painful for the government of President John Dramani Mahama, a democratically elected civilian, in office since 2012. Ghana’s political situation seems solid now after a stormy period that followed independence in 1957. That period included not only the presidency of Kwame Nkrumah, who ran through the nation’s substantial cash reserves, but also a series of military leaders, whose rule ended in 2000.

Ghana’s long-term economic prospects remain good, based on its resources, which include gas and oil as well as gold, diamonds and cocoa, but also on its people’s general positive, resourceful attitude. In the meantime, it will need to trim its wings modestly to retain its star status.

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