IMF austerity policies stifle public service delivery – ActionAid report

A new report released by ActionAid Ghana in partnership with Public Services International and Education International confirmed concerns expressed by financial and tax sector experts over the alarming debt crisis.

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

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. , and trends in the overall public sector wage bill as a percentage of 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 IMF advice – as part of the policy of streamlining public sector wages to contain and reduce the payroll.

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 increasing budget rigidities due to the sharp increase in debt service, especially interest payments.

Public debt service

The report found that Ghana spends 59% of its income on debt service, 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 increase in public debt compared to the decline in GDP growth.

He further revealed that the percentage of public 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 develop gender-sensitive public social services such as education, health, social protection, water and sanitation – further exacerbating already existing gender inequality and women’s unpaid domestic services.

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%) and 1.6 times (16%) 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.

The report observed that the rapid increase in public debt and debt servicing costs have 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 ”.

IMF austerity policies

The report also found that as part of the IMF-sponsored fiscal consolidation program launched in 2015, the government accepted the conditionality of the key public sector wage rationalization policy program to contain and reduce the wage bill. .

Conditionalities according to the analyzes included the government’s implementation of a hiring freeze in most government agencies and caps on nominal wage increases.

The health and education sectors have experienced much more stringent control over hiring. For example, a healthcare establishment or an educational establishment cannot hire without the financial authorization of the Ministry of Finance and the relevant ministry.

For example, the national average teacher-student ratios are 32: 1, 31: 1, 15: 1, 20: 1 and 27: 1 for pre-primary, primary, lower secondary, secondary and higher, respectively. This is well above the overall threshold of 15: 1 for preschool, primary and lower secondary levels, 13: 1 for upper secondary and even lower for tertiary (less than 13: 1). .

The current arrangement means that Ghana’s ratios are twice as high as economic efficiency levels, a situation that affects productivity and the delivery of quality education. A review of the gap suggests that to achieve the goal of universal primary education or SDG 4 by 2030, Ghana will need to recruit around 15% more teachers each year at the primary level by 2030.

When it comes to healthcare, the average doctor-to-population ratio of 1: 8132 per population far exceeds the WHO global threshold of 1: 1000. “We found that Ghana needs to close a net budget deficit of 40 (US $ 206.6 million) to meet minimum staffing requirements for primary and secondary health services.

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.

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 provision of gender-sensitive public services, it is recommended that the IMF move away from political councils that give absolute primacy to short films. manage macro-stability, but rather what helps the country move towards long-term planning so that it can take into account longer-term returns on investment in education, health, social protection programs and sanitation.

ActionAid also recommends that the government, as part of its long-term planning, determine staffing and compensation levels compatible with the public sector wage bill and allow a motivated and professional teaching force to function on a sustainable basis.

We also urged the government to renegotiate with development partners (IMF and World Bank in particular) a mechanism to ensure that debt service does not exceed 18% of public revenue.

The government is also encouraged to develop policies that support the goals of the SDGs and the decent work agenda of the International Labor Organization, which involve the creation of decent jobs, rights at work, social protection and social dialogue with gender equality as a transversal objective.

ActionAid calls on the government to conduct a human rights and gender impact assessment of any policies impacting the public sector workforce, especially education, health, social protection, water and sanitation.

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