Ghana faced down the first major challenge to an IMF austerity program 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 honor the $918 million IMF program 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 (labor) issues for the preparation of the 2016 budget process," he said.
LIMITS TO UNION POWER
The strike by Ghana's 2,800 doctors who were pushing for more clearly defined conditions of service including payments for additional work is not the only possible labor action.
The Coalition of Concerned Teachers said it was laying the groundwork for a strike in September when schools reopen to push for better conditions of service and the National Association of Graduate Teachers has made similar threats.
In particular, the Coalition wants to reform a system under which new teachers can work for up two years before receiving their first paycheck and then only receive a part of their arrears, said Ernest Opoku, president of the coalition.
"We make our own decisions and we have issued threat upon threat. They (doctors) had to strike first, but it doesn't change the way we want to go about it," he told Reuters, adding that the coalition had about 20,000 members.
Despite the threats, the chances of a broad strike that could shake the government are undermined by the fact that there are multiple unions and associations in Ghana even within the same profession and often they compete for membership and funds.
For example, there are at least three associations of school teachers. The biggest and most established, the Ghana National Association of Teachers, has no plans to join CCT action.
As a result, it is difficult for public service unions to achieve a consolidated challenge to government. High unemployment also reduces the leverage of private sector, non-professional unions because employees are easy to replace.
"Professional associations can use their muscle but the threat of strike action leads quickly to negotiation," said Yao Graham, head of the Third World Network, a research and advocacy group. "There is a climate in Ghana to resolve differences quickly."
