TUC lauds BoG for financial sector clean-up, reviews economy

The Trades Union Congress (TUC) has commended the central bank Governor, Dr. Ernest Addison, for having the courage to implement the banking sector clean-up exercise – which it described as ‘difficult but necessary measures’.

The TUC observes there are indications that the sector is regaining public confidence, and the economy of Ghana is expanding at a higher rate. A solid banking sector is required to support even faster growth of the economy, said a statement released by the umbrella-body of 18 affiliate unions in the country.

Titled ‘Comments on Mid-Year Fiscal Review of the 2019 Budget Statement and Economic Policy’, the TUC statement however said one area that needs special attention is the management of exchange rate for the Ghana cedi, in terms of relevance to the major international currencies.

“A more prudent management of the exchange rate is important, not only because it affects the price of imports of essential commodities such as medicines and food, but it also impacts adversely the payment of interests on our huge foreign debt in terms of revaluation losses.”

The statement also notes that in the last two years, “We have witnessed a very significant decline in interest rates. The 91-day Treasury bill rate has stabilised at around 14.8 percent. Commercial banks are lending to each other at an average rate of 15.2 percent. We are therefore wondering why lending rates are still hovering around 28 percent. We are told that private sector credit expanded by 16.8 percent at the end of June 2019, but this was achieved at a high cost to the private sector.

“The relatively high cost of capital in Ghana compared to our trading partners makes our private sector less competitive and significantly reduces the ability of private sector firms to pay back loans, hence the high rate of Non-Performing Loans (NPL) facing our banks.”

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The TUC observes that business people who borrow from our banks must either be geniuses who can make profit in a very challenging environment, or they must be willing to default. No wonder that nearly a fifth of the loans borrowed from banks in Ghana are not recovered. This situation has persisted for a long time.

“But, strangely, we do not see any concrete measures in the Budget Review to deal with this major problem. Until we manage to bring lending rates down to reasonable levels, our quest for industrialisation and private sector development will continue to elude us.”

On employment, the TUC says the statement presented by the Honorable Minister to Parliament did not contain any robust analysis of impacts from the positive developments in macroeconomic management on job creation.

“Given the enormity of the employment problem in Ghana, we need an Akufo-Addo Plan similar to the Marshall Plan in order to make a significant impact on the employment situation in the country. This requires that all development efforts, policies and programmes must focus on job creation. Our trade policies, investment policies, procurement policies, industrial policies, agricultural policies, financial policies and, most importantly, macroeconomic policies must all aim at creating decent jobs.”

On revenue performance, the Union believes government is now relying disproportionately on personal income taxes, corporate taxes, and petroleum taxes as revenue sources.

“But higher income taxes and petroleum taxes are adversely affecting disposable incomes and living standards of workers and their families. Similarly, higher corporate taxes are negatively affecting the ability of businesses to be more competitive and to create more decent jobs,” it notes.

The body also noted that the agriculture sector needs further attention, because it is underperforming. In the last 5 years, the agriculture sector has grown by an average of 3.4 percent, which is below the overall GDP growth rate.

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Given the role government has assigned to agriculture in our socio-economic development, the sector should grow at a much faster rate than industry and services, the TUC believes.

The Union also observed that the Minister for Finance announced in the Mid-Year Budget review: “Government will ensure that salaries on the SSSS (Single Spine Salary Structure) enjoy higher salary increases than those outside the single spine.

“This is long overdue. Therefore, we would like to assure government that the TUC will support this policy. Such pay inequalities in the public sector serve as great disincentive to public sectors workers who are currently placed on the SSSS – including health workers, teachers, civil service workers, local government workers, and workers in the judiciary.

“Pay inequality in favour of those who are not placed on the SSSS further undermines the principle of equal pay for equal work that underpinned the single spine pay policy. Government should therefore address the pay inequality without further delay, to avoid any agitation from those who are affected.”

The macroeconomic performance in the last couple of years has been very encouraging. The continuous growth of the economy, the falling inflation and interest rates, the relatively stable exchange rate, the trade and current account surpluses are all good indications that a solid foundation is being built for further economic growth and prosperity.

“We should now work together to ensure that the macroeconomic progress reflects sufficiently in the lives of all Ghanaians. We need to work together to bridge the gap between the rich and poor through the creation of decent jobs and provision of social services. We must also pay more attention to agriculture and manufacturing,” it concluded.

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