- Lower Inflation May Protect Pay, But Productivity Must Drive Lasting Wage Gains – Dr Theo Acheampong
Ghana could keep inflation below 10% over the next three to four years, economist and political risk specialist Dr Theo Acheampong says, pointing to projections in the government’s medium-term fiscal framework.
His outlook places price stability at the centre of a wider debate about workers’ purchasing power, public-sector pay and the government’s limited room to fund investment.
“The forward projection for prices going forward into the next three to four years in the medium-term budget is all within the sub-10%,” he said.
The projection, which is expected to be examined further in the 2027 Budget, offers a possible period of greater predictability for households and businesses.
But keeping inflation below 10% would not, by itself, guarantee that workers’ incomes rise in real terms. The effect of any pay increase will depend on whether wage adjustments keep pace with the cost of living.
Dr Acheampong’s most striking comparison is that a 5% pay increase in a stable economy could deliver more than a 30% adjustment during a period of runaway inflation.
“If you can get all these things working right, and things are stable, even if you offer workers 5% in a stable environment, is always going to be better than offering them 30% when you have runaway inflation,” he said.
The point is that the percentage printed on a payslip does not tell the whole story. A large nominal increase can be quickly eroded when prices rise sharply. In a lower-inflation environment, a smaller adjustment can retain more of its value and make household budgeting easier.
But the comparison needs an important qualification: a 5% salary increase does not necessarily improve purchasing power if inflation is higher than 5%. If prices rise by 8%, for example, a worker receiving a 5% increase is still likely to lose ground in real terms.
The benefit of price stability is that it slows the erosion of income and makes the outcome of wage negotiations more predictable. It does not automatically mean that every salary adjustment will leave workers better off.
That distinction makes the inflation target and the wage debate inseparable. Government will need to show not only that prices can remain within single digits, but also how it expects incomes, employment and productivity to develop alongside them.
The medium-term projection is an outlook, not a guarantee: exchange-rate pressures, commodity-price changes, fiscal slippages and domestic supply constraints could all complicate the path.
Acheampong argues that the measure of recovery should ultimately be a durable improvement in living standards. “We also recognise really that at the end of the day, what you want is a durable improvement in living standards,” he said.
Such an improvement extends beyond salaries. Reliable public services, accessible transport, employment opportunities and a more productive economy all affect what households can afford and the quality of life their incomes support.
If public transport is unreliable or essential services are costly, the purchasing power of a salary may remain constrained even when headline inflation is lower.
The government faces another constraint: the share of public expenditure already committed to compensation, interest payments and statutory transfers.
Dr Acheampong said employee compensation has accounted for between 25% and approximately 35% to 36% of total government expenditure since 2008, averaging about 30%.
He described Ghana’s wage bill as unusually high compared with regional peers. “But when you compare Ghana’s wage bill to some of our peers, even within the subregion, you can see that the wage bill is quite extraordinarily high,” he said.
The concern is not simply the size of public-sector salaries. It is how the state balances recurrent obligations with spending that can expand future productive capacity.
When a large portion of expenditure is already committed, fewer resources may be available for roads, energy, industrial development, education, healthcare and other capital investment.
“There’s actually nothing left to pay for capital expenditure,” Acheampong said, describing the pressure from the government’s major spending commitments.
That warning highlights a difficult policy choice. Public workers need fair and predictable remuneration, but compensation pressures can narrow the fiscal space for investment that could raise productivity and create jobs.
Cutting or containing wage costs alone would not resolve the problem if public services weaken or if the economy fails to generate more revenue. The challenge is to make spending more effective while expanding the productive base that supports both public services and private-sector growth.
Productivity is therefore central to whether lower inflation translates into lasting wage gains. Price stability can protect the value of existing income, but it does not automatically raise output, increase competitiveness or create better-paid work. Sustainable wage growth requires firms and public institutions to produce more value from labour, capital and technology.
The 2027 Budget will be an important test of how the government intends to connect its inflation outlook to these broader goals. It will need to clarify the assumptions behind the medium-term projection, explain the risks to keeping inflation below 10%, and show how fiscal policy can accommodate fair pay while preserving investment capacity.
For workers, the test of recovery will not be the size of a nominal pay increase alone. It will be whether salaries keep pace with living costs, whether essential services are accessible, and whether employment opportunities allow households to improve their circumstances over time.
Dr Acheampong’s argument is that a stable economy can make each cedi of income more dependable. Turning that stability into higher living standards, however, will require more than low inflation. It will depend on wage policy, public spending choices and productivity gains that make real income growth possible.
