NPP’s Dedication to Preserving Public Sector Employment Despite IMF Program Commendable

Author: Professor Isaac Boadi
Senior Lecture, UPSA

Over the years, Ghana has sought financial assistance from the International Monetary Fund (IMF) during economic instability. Ghana’s relationship with the IMF dates back to the 1980s when it implemented its first Structural Adjustment Program (SAP). Since then, Ghana has engaged with the IMF multiple times, including in 2009, 2015, and most recently in 2022, each time with varying impacts on the economy and the public sector.

While these programs often come with much-needed financial support and policy guidance, they have also attracted significant criticism, particularly for their impact on public sector jobs. One of the major points of contention is that IMF-backed economic reforms often result in austerity measures, including restrictions on government spending, which directly affect employment in the public sector. In the 1980s and 1990s, under IMF and World Bank guidance, Ghana implemented widespread reforms to reduce government expenditure, including the retrenchment of public sector workers. During this period, tens of thousands of public sector employees were laid off, particularly in government ministries, state-owned enterprises, and public service departments. The rationale was to cut down on the public wage bill, which was seen as unsustainable and a major contributor to Ghana’s budget deficits. In addition to layoffs, the government imposed hiring freezes, preventing the replacement of workers who retired or left the public sector. This led to a reduced capacity to deliver public services and caused significant discontent among civil servants and the general population.

In 2015, Ghana entered another agreement with the IMF, this time seeking to stabilize the economy after years of fiscal mismanagement and mounting debt. The $918 million Extended Credit Facility (ECF) came with conditions that included reducing the public sector wage bill, which had ballooned to unsustainable levels. The government was required to control the wage bill, which accounted for more than 70% of tax revenues at the time. This led to widespread dissatisfaction among public sector workers, who saw their real incomes eroded by inflation and rising living costs.

In 2022, Ghana once again turned to the IMF for a bailout, seeking $3 billion in assistance to stabilize the economy amidst high inflation, a depreciating currency, and rising debt levels. As with previous programs, there were concerns about the impact on public sector employment, with austerity measures likely to affect jobs in government ministries and state-owned enterprises.

This current administration focused on fiscal consolidation and strong public finances in the budgets for 2023 and 2024 as part of its efforts to reestablish macroeconomic stability. These initiatives are supported by structural changes meant to improve public financial management, boost domestic resource mobilization, and establish an atmosphere that more effectively encourages the growth of the private sector. Protecting those who are poor and marginalized is essential while implementing drastic changes to get out of an economic slump. Considering this, the government’s implementation of fiscal consolidation and spending rationalization measures because of the IMF PC-PEG program resulted in a faster rate of increase in the overall budget allocation to the education sector than it did in the period before the IMF. Specifically, from GHC 20.39 billion in 2022 to GHC 24.77 billion in 2023, the nominal education budget grew by 21.5% in 2023. From GHC 24.77 billion in 2023 to GHC 32.79 billion in 2024 – a rise of 32.4 percent – the budget for the 2024 fiscal year experienced a somewhat larger increase.

What makes this program different from earlier IMF initiatives, which typically entail a hiring freeze in the public sector is the fact that Ghana Education Service (GES) enlisted 13,713 teaching and 1,566 non-teaching staff members for the 2022–2023 school year. The Ministry of Finance granted GES financial authorization to hire 16,500 more teachers and 1,500 non-teachers this year to increase the number of workers in pre-tertiary education.

However, the detrimental effects of IMF programs on public sector employment have been a key point of contention for Ghana throughout the years. Considering this, the government reaffirmed its position during discussions with the Fund and its commitment to safeguarding social investments and jobs in the public sector.