In an effort to stabilise the economy by targeting the fiscal and current account twin deficits, which have become major sources of overall economic vulnerabilities, Finance and Economic Planning Minister Mthuli Ncube has unveiled a budget which proposes a 5 percent salary cut on all senior civil servants including the presidium and officials in State Enterprises as treasury embarks on a raft of cost cutting measures to contain expenditure.
Recurrent expenditure, comprised of salaries and benefits for the civil service workforce, gobbled in excess of 90 percent of the Budget, crowding out investment and social expenditure.
The cuts come at a time inflation has risen to 20,85, the highest since Zimbabwe ditched its local currency for a basket of local currencies mainly dominated by the United States dollar.
The 2019 $8 billion National Budget, also had a cocktail of shocking revenue mobilisation initiatives including massive increases on fines and collection of taxes in hard currency. The Finance minister also reviewed the country’s GDP growth rate to a modest 4 percent from 6,3 percent after treasury rebased the economy to $25,8 billion from $18 billion.
On currency reforms, Ncube said Zimbabwe would maintain the obtaining multi-currency regime which is anchored on the greenback.
In an unprecedented move, Ncube announced Government has decided that effective 1 January 2019, a 5 percent cut on basic salary, be effected for all senior positions from principal directors, permanent secretaries and their equivalents up to Deputy Ministers, Ministers and the Presidium.
This was part of wage and non-wage expenditure rationalisation measures which he said are now being implemented consistent with the Transitional Stabilisation Programme which is anchored on austerity measures, good governance, state owned enterprises reforms and re-engagements with bilateral and multilateral creditors.
“This is also extended to basic salaries of those in designated posts in State Owned Enterprises (CEOs, Executive Directors and equivalent grades), including Constitutional Commissions and grant aided institutions,” Ncube said, adding “a standardisation or alignment exercise in remuneration including benefits for Constitutional Commissions, will also be undertaken to remove inequity and disparities.”
This comes after Presidential spokesperson George Charamba recently told Business Times tough calls would be made to restore fiscal balance with all citizens, including President Emmerson Mnangagwa who is victim to the pay cut, required to share the burden.
The move also follows rising inflation. The year on year inflation rate quadrupled to close the month of October 2018 at 20,85 percent, compared to 5,39 percent the previous month as foreign currency pressures take a toll on the economy.
The inflation rate gained 15,46 percentage points on the September 2018 rate of 5,39 percent, raising fears the country could be creeping back into hyper inflation.
Ncube also proposed a cut on the civil service bonuses by way of making the 13th cheque henceforth, computed based on basic salary only excluding housing and transport allowances. This effectively means the civil service will not be getting 100 percent bonuses.
Ncube said Government has taken the position bonus be payable for 2018, with commitment that these payments be processed before year end in light of prevailing economic hardships.
Previously, the Budget incurred expenditure of around $174,6 million in bonus payment.
In the same spirit of wage rationalisation, Ncube proposed to introduce a biometric registration of all civil servants, with effect from 1 January 2019 to improve accountability. This is expected to eliminate ghost workers whose possible existence was pointed out in two previous civil service audits of 2011 and 2015.
“The registration process will be rigorous and will involve capturing data on Letter of appointment, academic and professional qualifications, national identification documents, employment code numbers, and biometric Data. Biometric data will involve capturing of one’s unique physical attributes such as fingerprints, DNA, iris and retina pattern, using ICT,” he said.
Government also resolved to reduce the number of Foreign Missions, thereby optimising the utility value realised from the remaining missions as well as avoiding accumulation of arrears and embarrassing evictions of our diplomats.
Currently, Zimbabwe has diplomatic presence at 46 Embassies and Consulates, staffed by around 581 home based and locally recruited staff.
“The above diplomatic presence is currently imposing annual budgetary support levels of around $65 million, which is above available 2018 Budget capacity of $50 million,” Ncube said.
Government will also continue with its resolution to terminate employment contracts of 3 188 Youth Officers as previously resolved. So far, $5,2 million was mobilised in December 2017 towards three months’ cash in-lieu of retirement notices and in the second instance, $17,7 million on 16 February 2018 towards the officers’ pension benefits.
The 2 917 youth officers who still remain on the payroll, are being retired and the posts removed from the establishment, by end of December 2018.
Government officials above the age of 65 will be retired in line with existing policy with the responsible departments expected to be directed to process and finalise all due retirements. Measures are being introduced to manage governments fleet to improving efficiency and making savings in the face of ramant abuse of pool vehicles.
“Some public officers tend to use government operational or pool vehicles after working hours, during weekends and on public holidays, which practice contributes to unsustainable build-up of outstanding payment arrears to service providers related to maintenance and fuel bills,” Ncube said.
“Against this background, an austerity measure that leads to all government pool or project vehicles being parked at the work stations or the nearest police station after designated working hours, during weekends and public holidays becomes inescapable.
Similarly, all government pool vehicles will be transferred and centrally managed through CMED Pvt Ltd (and) entities with capacity to maintain their fleet will be excluded from this directive.”
Minister Ncube also said line Ministries are now expected to institute further demand management measures for reducing utility bills by adopting cost effective delivery platforms which are ICT based.
Administration of the Public Service Payroll and Pension becomes a Treasury responsibility, with effect from 1 January 2018 in order to come up with an arrangement that facilitates fiscal consolidation, given that employment costs account for the largest nondiscretionary expenditures.
“In order to uphold the principle of transparency and accountability in the utilisation of public resources, Government Ministries and Departments will be required to remit all revenue collected into the Consolidated Revenue Fund, with immediate effect,” Ncube said.
“Outstanding balances should, thus, be deposited into the Consolidated Revenue Fund by 23 November 2018. Treasury will, however, ring-fence such revenues in line with the current approved retention levels. Disbursement will, thus, be through the Public Funds Management System,” he added.
Government plans to undertake a comprehensive review of retention levels, with a view to remove or reduce revenue retentions which are no longer in line with current policy priorities.