Ghana: The IMF, Trade Unions and Mahama

Ghana Lighthouse

On 31st August 2015, the International Monetary Fund (IMF) approved a second aid disbursement to Ghana worth $116.6 million in accordance with a three year aid deal agreed in April 2015. This followed a review of Ghana’s economic performance, conducted by the IMF’s Executive Board, which found that Ghana’s progress “has been broadly satisfactory, despite an unfavourable environment”. Nevertheless, the IMF made it clear that the continuation of its aid program rests upon the government of Ghana’s adherence to terms set out in the April agreement. As the Acting Chair of the Executive Board – Min Zhu – stated “the government should firmly continue with its fiscal consolidation efforts to fully restore macroeconomic stability and mitigate financial risk”.

Although the second disbursement was undoubtedly welcomed by President John Mahama’s administration, the continuation of “fiscal consolidation” policies advocated by the IMF could cause serious political problems for the government. Ghana’s trade unions have been highly critical of the IMF bailout and many have vowed to oppose the austerity policies connected to it. Although the Trade Union Congress (TUC) backed down from its outright opposition to a deal in March 2015, its Secretary General – Kofi Asamoah – noted that the organisation “will resist anything that will be done to worsen the plight of the workers”.

The first example of trade union opposition to austerity policies came from the Ghana Medical Association. Around 2,800 public sector doctors went on strike in early August 2015, first withdrawing their services to out-patient departments before extending the strike to include emergency services. However, the strike only lasted three weeks and was suspended on 21st August 2015. This was undeniably a significant victory for Mahama’s administration, which had fought an intense public relations battle with the union throughout the strike. It not only demonstrated to the IMF that the government is committed to the policies outlined in the April agreement but also acts as a warning to other unions which are planning strike action.

Nonetheless, this victory could be short-lived. Despite the fragmented nature of trade unions in Ghana, with many industries home to competing unions, it seems highly likely that more strikes are to come. Unions argue that their current salaries are being undermined by inflation, which is nearly at 18 percent, whilst the IMF insists that “it is crucial to continue the policy of controlling the wage bill”.  Such contradictory views will surely come to a head and the government of Ghana will face the brunt of it.

Furthermore, following the announcement from The Electricity Company of Ghana (ECG) that it wants tariffs to increase from 44 pesewas to 1 cedi per unit, it’s possible that Ghana’s unions could attract widespread popular support. On 31st August 2015, the ECG, along with Ghana’s Water Company, put forward the case for tariff increases to the Public Utilities Regulatory Commission (PURC). This is in line with policies supported by the IMF, which has backed the government’s plans to remove energy subsidies. Although the ECG is expected to meet other interested parties, including the TUC, to discuss the proposed increases, if the tariff increment is accepted by the PURC it is expected to take effect from 1st October 2015. Due to Ghana’s erratic power supply, such a policy could prove to be extremely unpopular unless the ECG can guarantee a more consistent service. Thus, the unions’ focus on the undermining of salaries by inflation could strike a chord amongst a population already dissatisfied with the country’s poor, and possibly soon expensive, electricity supply.

With an election next year and most commentators predicting another tight race (Mahama won in 2012 by less than 3 percent of the vote), such opposition from trade unions could be problematic for Mahama. If the unions are able to garner the support of other sections of society, particularly youth groups, it’s likely that Ghana will witness an increasing number of strikes and demonstrations during the lead up to the election. This will be a major test for Mahama’s support of IMF-backed policies, as greater social unrest will affect his electoral chances, especially if the opposition choose to support the unions. Thus, it is possible that Mahama may look to soften some of the policies as the election approaches.

As a number of teachers’ unions have already stated that they are planning a strike at the start of the new term, it seems that Mahama is set to face another test very soon. If these strikes go ahead, it’s possible that they may coincide with the proposed electricity tariff increases, which could spark demonstrations of their own. This would put Mahama under significant pressure to capitulate to at least some demands, particularly as he will have an eye on next year’s election. Although it is unlikely that Mahama’s administration will perform a U-turn on the IMF-backed policies, greater social unrest will put pressure on him to do so. As the election approaches such pressure will increase and it’s likely that Mahama will look to at least soften the effect of austerity policies in order to improve his political position. However, this could be a risky strategy as Ghana’s economy, particularly in light of the low oil price, is likely to continue to need IMF financial support and a failure to implement their “fiscal consolidation” policies could mean that later disbursements are not approved.

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