Less than five months after the death of President John Attah Mills, Ghanaians have been handed what some local analysts term a bitter pill to swallow by the current leadership in the country. The news of a proposed increase in salaries of politicians jolted the public, with the President’s monthly salary to increase by 49.9% from $4,240 to $6,357 tax free, ministers to $4,770 and members of parliament from $2,225 to $3,800.  Even with the proposed increase, Ghanaian politicians especially the members of parliament will still be earning less when compared with their counterparts in neighbouring Nigeria.

The Nigerian members of parliament (Senators and House of Representative members) reported earn average of $1.57m  per annum as against around $71,920 recommended by the country’s Revenue Mobilization Allocation and Fiscal Commission (RMFAC). What these two countries appear to have in common with respect to the salaries of their politicians is the secrecy with which the remunerations are determined. While the Ghana Integrity Initiative frowned at the clandestine manner in which the proposed salary increase for the politicians was done,  the Nigerian public has since 1999 when the country returned to democratic rule been left bewildered with the reported earnings of the members of the parliament in defiance to the recommended salaries by the RMFAC. However, this piece is not meant to elaborate much on the situations in the two neighbouring countries but to put in perspective, the current development in Ghana vis-a-vis the living conditions of the ordinary Ghanaians.

Ghana in recent times has made giant strides, especially with stabilization of its democratic process, with countries in the ECOWAS region taking a cue on this immeasurable progress. However, there are still challenges that must be tackled and one way not to do this is through the astronomical increase in salaries of the politicians. Ghana’s gross national expenditure as a % of GDP averaged 107% between 1960 and 2011 and the proposed increase in salaries of the politicians will increase the recurrent component of government spending, with little multiplier effect on the economy. Any increase in government spending should be in critical sectors of the economy such as health, education and agriculture, in order to improve the living conditions of Ghanaians and ultimately boost economic growth. For example, health expenditure as a % of GDP averaged only 6.4% between 1995 and 2011 and this relatively low spending may be responsible for the poor healthcare delivery service in the country. The number of physicians per 1,000 people was 0.05 in 1960 and by 2010 it was only 0.09, meaning that healthcare delivery in Ghana is something to really worry about. Also, community health worker per 1,000 people is 0.19 while hospital beds per 1,000 people is only 0.90. Youth unemployment remains high at about 17% while only 14 people per 100 have access to internet. Although it may be argued in some quarters that Ghana’s per capita income in purchasing power parity terms has grown over the years, increasing consistently since 1980 when it was $470 to $1,800 in 2011, poverty remains a challenge. As at 2006, about 52% of the total population live below $2 per day with income inequality continuing to rise. For example, Gini-coefficient which was 35% in 1988 increased to 41% in 1998 and to 43% in 2006.

Apart from improving the living conditions of Ghanaians, any increase in government spending should also be targeted at massive infrastructure development as this will help sure-up the competiveness of the economy. In 1975, Ghana’s current account balance as a % of GDP was 0.63% but since 1976 it has been in deficit, averaging negative 4.68% between 1976 and 2010. Also, in 2010 Ghana’s external reserves were able to cover about 4.3 months of imports but by August 2012 the reserves could only cover 2.4 months of imports.  This 2.4 months import cover is lower than the regional convergence criteria of 4 months and 3 months for the International Monetary Fund. The implication of this is that the propensity to import in Ghana may continue to rise at the expense of exports.

In summary, the proposed increase in salaries of politicians in Ghana may be ill-timed for a number of reasons. Firstly, it may heat up the polity since the general elections are scheduled for December 2012. Secondly, the increase will jerk up total government spending which will have lower multiplier effect on the economy when compared with investment multiplier. Besides, it may result in inflationary pressures which could also lead to the appreciation of the real exchange rate. Thirdly, income distribution may become more uneven with the resultant rise in social tensions. Finally, what Ghanaians need is government spending in critical sectors of the economy that will boost inclusive economic growth and sustainable development.