Ghana’s executive will take a 10% cut in salary effective January 2014, Finance Minister Seth Terkper announced on Tuesday when he presented the government’s 2014 budget to Parliament in Accra.
He said this was to demonstrate leadership and show efforts being made to solve the ballooning public sector wage bill due to the implementation of the single spine salary structure (SSS).
The money realised from the pay cut by President John Mahama and his team would be used to construct specialised Community Health Programmes and Service compounds, to deal with maternal mortality and neo-natal health care.
The government has been groaning under the burden of the new pay policy that has seen significant increases in salaries of government employees but has a huge negative effect on the country’s finances as it takes up about 70 per cent of the revenue.
“The Single Spine Salary Structure is imposing severe strain on the economy but government, employers and organized labour are continuing negotiations on how to solve it,” Terkper said.
He said total government expenditure for 2014 would 35 billion Ghana cedis or 33.1% of the GDP, which would be 17.7% higher than for 2013. About 11.2 billion Ghana cedis of the total expenditure would be spent on wages and salaries, representing 10% of GDP or 52% of tax revenue. (US$1=2.12 Ghana cedis).
The provisional real GDP growth in 2013 was 7.4%, down from the 2012 growth of 7.9%. Inflation rose persistently from 10.1% in January 2013 and was 13.1% in October 2013, influenced primarily by the pass through effect of fuel and utility price increases and demand pressures.
The provisional trade balance for the period January to September 2013 recorded a deficit of US$ 2,744.2 million, compared with the US$2,970.2 million recorded at end-September 2012.
Terkper said the specific macroeconomic targets for the medium term (2014-2016) include an average real GDP (including oil) growth rate of at least 8%; inflation target of 9%; an overall budget deficit of 6% by 2016 and gross international reserves which will cover not less than 4 months of imports of goods and services by 2016.
The minister said the sound policies implemented by the government resulted in stable economic growth which had retained high investor confidence in the economy.
The minister announced the removal of taxes imposed on imported items such as agricultural materials, outboard motors and medical supplies, including condoms, effective January, 2014.
The Finance Minister said the government preferred the more efficient and reliable Value Added Tax (VAT) system of raising money to fund its programmes and projects.
Government last week increased the VAT rate by 2.5% to 15% in addition to 2.5% National Health Insurance Levy.
Mr. Terkper said the 2.5% increase in the VAT rate was necessary to support government’s infrastructure expansion project.