November 26th 2013

Ghana’s economy and the fight for maternal survival

"Youth unemployment rising in Africa: The case of Ghana." Source"Youth unemployment rising in Africa: The case of Ghana." Source

Advocacy International advises a consortium led by OPTIONS UK on an advocacy campaign – MamaYe! – to increase maternal and newborn survival in Ghana. The MamaYe coalition in Ghana is led by Prof Adanu of the School of Public Health, and Vicky Okine of the Alliance of Reproductive Health Rights. Recently the MamaYe coalition appealed to Ghanaian MPs for an increase in spending on maternal and newborn health.

What chances are there of success for this campaign?

First, it is important to note that Ghana has halved levels of poverty since 1992. In that year, nearly 52% of Ghanaians lived in poverty. By 2006 Ghanians living in poverty had been halved to 28%, according to the World Bank.

This is in large part due to the rapid growth in Ghana’s GDP – growth driven by the mining/manufacturing, construction, wholesale/retail trade and to some extent transport.

As a result of these improved conditions government spending on health increased, and, according to the WHO, rose to 15% of GDP. However, according to recent data, in 2012 the Government fell short of meeting this benchmark, spending only 12.5% of its total budget on health.

This fall in health spending may have to do with the wider economic challenges faced by the Ghanaian government in managing government finances.

All the indications are that the level of unemployment, especially among young people, is very high. These levels lead to fiscal imbalances, for the simple reason that Ghana’s talented youth are left idle, and are not contributing tax revenues.

John Yaw Amankrah, Assistant Chief Statistician and Head of Labour Statistics, Ghana Statistical Service argues in a 2012 CEPA briefing paper that “about 60 per cent of the unemployed in Ghana can be found in the 15-24 years age group. This makes Ghana’s youth unemployment rate one of the highest in the world.”

To make matters worse for those lucky enough to be in employment, Ghanaian incomes are falling, according to the World Bank. Rising prices and currency depreciation has led to a decline in the real incomes of workers especially those on fixed incomes. In August 2013 public sector employees were given pay rises of 10% – nearly 2% below current levels of inflation (11.9% in September, 2013, according to the Bank of Ghana). This implies real cuts in civil service pay. In addition the real minimum wage declined as the consumer price index (CPI) lies above the minimum wage index. (World Bank)

Falling incomes implies falls in consumption, which in turn cuts government sales tax revenue, worsening the budget deficit.

Added to this, government revenues (from oil and other sources) have fallen short of expectations as a result of energy disruptions and high real interest rates – intensifying fiscal pressures on Ghana’s government. Foreign borrowing at high rates act as a burden on the budget, and drains the government’s foreign reserves.

Real interest rates in Ghana are indeed high, as the IMF notes. The Bank of Ghana’s base rate is 16% – well above inflation. The rate on Ghana’s 91-day bonds is close to 20%. Because bond rates influence interest rates in the real economy, this implies very high rates on longer term loans to Ghanaian households, small firms and other borrowers.

The Bank of Ghana’s rates are high because they are aimed at global capital markets. They are used to attract foreign investment and to arrest the depreciation of the Ghanaian currency, the Cedi. The effect of high rates however is to cut investment in the domestic economy – further depressing economic activity and employment – and therefore government tax revenues.

To deal with the budget shortfall IMF staff are recommending: “an additional fiscal adjustment of 3 percent of GDP by 2015, using a combination of revenue and expenditure measures, including a reduction in the wage bill as a share of GDP to make room for investment in critical infrastructure and social priority areas.”

In other words the IMF recommends further rises in taxation and cuts in both employment and pay for public sector workers.

This does not bode well for the health workers on Ghana’s public sector payroll.

Regrettably, Ghana has the highest emigration rates for highly skilled employees (46 percent) in Western Africa (OECD, 2005; Docquier and Marfouk, 2005). The medical professions are particularly affected by emigration. It is estimated that more than 56 percent of doctors and 24 per cent of nurses trained in Ghana are working abroad (Clemens and Pettersson, 2006).  Further cuts in healthworker pay will surely encourage more emigration.

And emigration will in turn reduce the number of skilled workers attending to mothers and newborns before, during and after childbirth.

So civil society and the government of Ghana, both dedicated to reducing maternal and newborn mortality rates, face an uphill challenge in increasing funding and human resources for maternal and newborn healthcare.

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