IMF austerity measures affecting public service delivery


The International Monetary Fund

In recent times, experts in the financial and fiscal sector have sounded the alarm bells and warned the government of the looming debt crisis. A new report released by ActionAid Ghana in partnership with Public Services International and Education International confirmed the concerns and red flags raised by these industry players.

The new report is in line with ActionAid Ghana’s fourth mission priority, which focuses on how to improve citizen participation, public accountability, effective mobilization and equitable redistribution of public resources to sensitive public services. to the genre.

Entitled “Public austerity versus austerity: the constraints of the wage bill”, the report analyzes trends in the public sector wage bill in the education and health sectors and the freeze or depreciation of wages. , as well as trends in the overall public sector wage bill as a percentage of the government budget. , income or GDP. It also examines the links between Ghana’s debt service and the public sector wage bill and how these relate to advice from the International Monetary Fund (IMF) – as part of the public sector wage rationalization policy. to contain and reduce the wage bill.

According to the report, although Ghana’s public sector wage bill has grown significantly over the past decade or so, the pace of growth has not kept pace with the growing needs for essential labor required in the sector. public sector, especially in education and health, as well, seriously affecting the delivery of quality public services.

The report further reveals that the government’s inability to absorb more public sector workers stems from growing budget rigidities due to sharp increases in debt service, especially interest payments.

Austerity measures

The report reveals that as part of the fiscal consolidation program sponsored by the IMF and launched in 2015, the government accepted the conditionality of the key program of the public sector wage rationalization policy to contain and reduce the wage bill. Conditionalities, according to analyzes, included the government’s implementation of a hiring freeze in most government agencies and capping nominal wage increases.

The health and education sectors have experienced much more stringent control over hiring. For example, health or educational institutions cannot hire without financial authorization from the Ministry of Finance and the relevant ministry. These restrictions have affected and continue to affect the provision of essential gender-sensitive social services such as health, education, sanitation and water.

The report observed that the rapid increase in public debt and debt servicing costs also limited the government’s fiscal space to expand employment in the health and education sectors, indicating a “deprioritization of public services in favor of debt service”.

The report further notes that “the COVID-19 crisis has exposed how underfunded public services have been for a generation across Africa, with women in the poorest communities often having to lobby to fill the gaps. shortcomings by unpaid care and domestic work. “

He indicated that the contraction of public services is having an even more negative impact on women as they constitute the majority of front-line workers such as teachers, nurses, midwives, doctors and other health workers. education and health. These, coupled with the increase in unpaid domestic and childcare services for women, push women further into poverty and undermine human rights progress – a situation that poses a significant threat to the achievement of human rights goals. sustainable development.

Public debt service

The report revealed that the percentage of government revenue devoted to debt service (over 40% between 2016 and 2019 and over 55% in 2020) far exceeds the IMF’s sustainable threshold of 12% and the limit of 18%. % by IMF country for Ghana. . This alarming situation has restricted the government’s fiscal space to provide and expand gender-sensitive public social services such as education, health, social protection, water and sanitation – further compounding inequality. existing gender and women’s unpaid domestic services.

The report further found that Ghana spends 59% of its income on debt servicing, making the country the second highest country in the world. These statistics which are analyzed data from the Ministry of Finance between 2016 and 2020 suggest an increasing public debt compared to a declining GDP growth.

The report indicated that, on average, between 2016 and 2020, over 40% of the government’s domestic spending and 26% of its total spending was on debt servicing alone. This is 1.74 times (17 percent) and 1.6 times (16 percent) higher than the shares of domestic spending and total spending in the public education and health payrolls. The current situation is not healthy for Ghana’s economic development as it hinders its efforts to achieve the majority of the SDGs.

The report further indicates that the amount spent by the government on public sector wages (including health, education, social protection, security services, sanitation, public works, administration, etc. .) is almost the same as the amount spent on paying interest on debts. Compared to its peers, Ghana has one of the lowest worker compensation-to-expenditure ratios (35.6%) in 2019, but has the highest percentage of interest payments over total expenditure (31, 7%) over the same period.

Role of the IMF and the government

The underfunding of these essential services is contrary to the International Covenant on Economic, Social and Cultural Rights (ICESCR), ratified by 171 UN member states, including Ghana. The ICESCR requires governments to devote their “maximum available resources” (Article 2 (1)) to gradually achieve the full realization of socio-economic rights for all (Center for Economic and Social Rights, 2020).

To fully mitigate the impact of the COVID-19 pandemic and, second, to avoid caps / freezes of the public sector wage bill on the delivery of gender-sensitive public services, it is recommended that the IMF move away from policy advice that gives absolute primacy to short -managing macro-stability but rather what helps the country move towards long-term planning so that it can factor longer-term returns on investment into development programs. education, health, social protection and sanitation.

ActionAid also recommends that the government, as part of its long-term planning, determine staffing and compensation levels that are consistent with the public sector wage bill and allow the functioning of a motivated and professional teaching force on a sustainable. He also urged the government to renegotiate with development partners (IMF and World Bank in particular) a mechanism ensuring that debt service does not exceed 18% of public revenue.

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