Doctors ends strike as President Mahama's re-election bid suffers

August 30, 2015 12:11 PM

The moment of truth will come next year when he faces opposition leader Nana Akufo-Addo in an election in December expected to be a repeat of the tight contest in 2012.

Ghana President John Dramani Mahama addresses the 69th United Nations General Assembly at United Nations Headquarters in New York, September 25, 2014. REUTERS/Mike Segar

Ghana faced down the first major challenge to an IMF austerity programme on Monday when doctors suspended a three-week strike but a bigger test of President John Mahama's commitment will come next year as he fights for reelection.

The International Monetary Fund deal is designed to restore fiscal stability and kickstart growth in a country that recently lost its reputation as one of Africa's strongest economies after years in which its GDP grew at around 8 percent thanks to exports of gold, cocoa and oil.

The end of the strike by the Ghana Medical Association makes it easier for the government to honour the $918 million IMF programme in the short-term. It also strengthens Mahama's hand should other disaffected unions stage industrial action, political analysts said.

But the decision by doctors to suspend their strike for better working conditions makes it harder for other civil servants to win redress for inequities and declining wages, potentially storing up grievances against Mahama's government.

The moment of truth will come next year when he faces opposition leader Nana Akufo-Addo in an election in December expected to be a repeat of the tight contest in 2012.

"The pressure on authorities to appease popular demands will intensify as the elections draw nearer," said Cobus de Hart, of NKC African Economics. "The challenge for government will be to prevent the snowball from getting too large."

Recent history shows the risk. Wage growth ballooned in 2012 ahead of the last election, causing a spike in the budget deficit and triggering a fiscal crisis that includes a debt-to-GDP ratio near 70 percent.

To keep to its IMF commitments, the government needs to contain pay agreements with civil servants to under 10 percent in its pre-budget round of talks with unions and ministries, according to Eurasia Group.

That may not be easy for Finance Minister Seth Terkper as he prepares the November budget. Inflation in July stood at 17.9 percent and the cedi currency has fallen sharply this year, undermining the real value of wages.

However, the Fund deal was sanctioned by parliament so both of the main parties should support government measures to keep it on track even as pre-election tensions rise, said John Gatsi, a senior lecturer in finance at the University of Cape Coast.

"The end of the strike provides ample opportunity for government to accommodate all the (labour) issues for the preparation of the 2016 budget process," he said.

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