ACCRA: ANALYSTS are wary of the negative impact of the government’s significant adjustment to public sector wages might have on the country’s currency.
The government of West Africa’s second biggest economy recently decided to increase public sector wages by 13 percent.
According to Rand Merchant Bank (RMB), the global market watcher, this was regardless of the significant strain the increase would place on Ghana’s already constrained fiscal position.
“The government has justified the move by saying that the International Monetary Fund (IMF) will not be piqued as the increase still falls within the budget limit. This is the first wage hike since 2013, but the government has compensated those affected by paying an annual 10 percent cost of living allowance. Rising wages has been one of the main causes of Ghana’s fiscal distress,” RMB said in its latest Global Markets Report.
It highlighted that just last week, Finance Minister, Seth Terkper, said the 2015 budget estimates needed adjustments to ensure the continued fall in the crude oil price does not derail the fiscal consolidation objectives.
“The wage hike and possible changes to the budget estimates could cause investor sentiment to drop even further, adding more pressure to the currency,” RMB warned.
At prevailing rates, 1 Cedi equals US30 cents.
SOURCE: CAJ NEWS AGENCY