IMF criticises Ghana wage, tax increases

By REUTERS
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By REUTERS

5/31/2000 -

ACCRA, May 31 — The International Monetary Fund (IMF) said on Wednesday it was unhappy with recent increases in import taxes and public sector wages in Ghana. IMF resident representative, Germa Bergashaw, told Reuters the imposition of a 20 percent import tax on selected items ran counter to regional efforts to reduce trade barriers.

He said it would only lead to more bureaucracy and administrative bottlenecks and would not help local industries, with importers likely to look for loopholes to evade the duties. Bergashaw's comments come on the third day of a one-week protest strike against in Accra the tax by members of the Ghana Union Traders Association, an umbrella organisation of importers, wholesalers and retailers, with a nationwide membership of an around two million people. ''What the government should do is that it should reduce expenditure and stop borrowing so that interest rates can come down,'' Bergashaw said. ''That'll do much more for local business people who can't raise capital from the banks because interest rates are close to 50 percent.'' The strikers are also protesting against this year's sharp fall in the local currency, the cedi. The protest has paralysed commercial activity in the main commercial districts of the city, with threats that traders in Kumasi, the second city, may join in. The tax affects a range of items, including milk, potatoes, flour, soap and chocolate. Earlier, the IMF representative said he was also uncomfortable with 20 percent wage increase announced this week by the government for some categories of public sector workers. ''It's a bit on the high side. I wonder if the resources are there,'' he said. He told Reuters some wage increases had been planned in the budget for this year, ''but the plan was to maintain wages as a percentage of GDP.'' But he said: ''If the resources are there, then it's a good idea, because I think people are earning too little.'' The government this week awarded a 20 percent increase to civil servants, nurses, teachers and members of the judicial service, with effect from April 1. The World Bank's initial reaction on Tuesday was that the rise was broadly catered for in the 2000 budget. Bergashaw said it was not clear where the government would raise the additional resources, because an increase in the value-added tax had already been earmarked to go to a special fund for education. ''Otherwise, they'll have to print more money or borrow from the banks and that could be inflationary or it will affect interest rates,'' he added. The wage increase followed months of agitation from workers, who said incomes were lagging too far behind prices as a result of higher fuel prices.

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