Dr. Mahamudu Bawumia
Dr. Mahamudu Bawumia

BawumiaVisiting Professor?of Economic Governance at the Central?University College?(CUC) and 2012 Vice-Presidential candidate?of the New Patriotic Party (NPP), Dr. Mahamudu Bawumia says the Single Spine Salary Structure is not the cause of the depreciation of the Cedi or the economic difficulties the country is currently facing.

He said this during his?lecture?on ?Restoring the Value of the Cedi? at the?Public Lecture?organized by the Central University at their Miotso campus in Prampram.

He compared the previous wage bill levels before the Single Spine Salary Structure was implemented to and the increases in revenue to make his point.

?At the end of 2008, the?Government?wage bill amounted to GHC1.98 billion, representing 41.3 percent oftotal?domestic?revenue of GHC 4.8 billion.? By the end of 2012, after 99% implementation of the single spine salary system, the government wage bill jumped by some GHC4.6 billion to GHC6.6 billion. While the government wage bill increased by some GHC4.6 billion between 2008 and 2012, total government revenue also increased from GHC4.8 billion to GHC15.5 billion over the same period. The increase in domestic revenue by GHC10.7 billion was more than twice the increase in the government wage bill. Indeed, by the end of 2012, the government wage bill following the implementation of the single spine salary system was 42.9% of total domestic revenues. This is not significantly different from the 41.3% in 2008. At the end of 2013 the government wage bill absorbed 53% of government revenue, underpinned by a weak?tax revenueperformance.

The current economic difficulties can therefore not be attributed to the single spine salary system which had been 99% implemented at the end of 2012. Furthermore the wage bill as a % of Ghana?s GDP (totalincome) even though high, is not new. It is within Ghana?s historical standards. Between 2002 and 2005 the wage bill averaged 8.5%. Following the?statistical?rebasing?of GDP, the wage bill as a percentage of GDPdeclined?to6.1% in 2007, and has risen steadily to 9.6% of GDP in 2013, ?? he noted.

Dr.?Bawumia?also said that the current difficulties were not as a result of the Single Spine?scheme?which was well thought through and planned for but more as a result of policy choices like the quadrupling of theNational debt?in 5 years with an addition of GHC40.5billion; the payments of huge sums in judgment debts and other fishy expenditures like GYEEDA, SUBAH, SADA etc.?as?well as the weakening fundamentals of theeconomy which?had limited the?fiscal?space available in the economy.

?Unfortunately, it appears as though?government?does not appear to have done a?holistic?analysis of the impact of its policy choices on the?budget?and fiscal outlook. If it had done so, it should have been clear that the policy of accelerated?borrowing?which?increased the?debt stock?by 426% in five years for?example would?take away some of the?cushion?or fiscal space that was available to the economy in terms of increased interest costs. The same conclusion would also have been reached with regard to the?acceleratedpayment?of judgment debts, GYEEDA,?etc?,?? he added.

According to the?former?Deputy Governor of the Bank of Ghana the problem is therefore not with the SSSS which was planned for, even if poorly implemented. ??The problem is with the fiscal space that has been eliminated by the high levels of borrowing, dubious payments under GYEEDA, SADA, SUBAH, and questionable judgment debt payments all of which were not planned for at the time the single spine salary system was designed,?? Dr?Bawumia?said.

The Economist alluded that Single Spine is no way the cause of the depreciation of the exchange rate or the current economic woes and therefore should be left alone.

Source citifmonline

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