Zim Govt adopts austerity measures

TAURAI MANGUDHLA

GOVERNMENT has adopted auster – ity measures to contain public spend- ing and inflation, chief among them a freeze on civil service wages, a top Government official has said. Freezing salaries for civil servants, constituting the bulk of formal workforce in an increasingly informalised econ – omy, is meant to control inflation by limiting disposable income. Treasury Bills running into hundreds of millions that have been put into the market in recent months have also been driving inflation. Despite growing pressure to review up – wards salaries for Government employees as the cost of living increases, Treasury is sticking to its guns to cut recurrent expenditure for the greater good. A pay rise in the public sector also nor – mally forces the private sector to increase salaries for their employees. Freezing salaries, said a top official who requested not to be named, is in line with President Emmerson Mnangagwa’s thrust to cut costs and make moves that have a long term benefit for the economy.

“Under the previous administration we would have increased salaries especially for the security forces, but everyone has got to feel the pain and share the burden of rebuilding our country,” said the source.

In an opinion piece published in the Finan – cial Times this week, President Mnangagwa said Government is not afraid of taking tough, and at times painful, decisions.

“In order to reform, restructure and rebuild the Zimbabwean economy, the national budget must be balanced and spending reined in. The government wage bill is unsustainable,” Mnan – gagwa said.

“A large and inefficient public sector cannot be allowed to hold back private enterprise. We have set about cutting unnecessary expenditure, there – fore. We are reducing the number of ministries, limiting foreign travel and perks for officials, and retiring or redeploying senior officers,” he added. This comes after Deputy Chief Secretary for Presidential Communications George Charamba recently told Business Times Government is tak – ing recurrent expenditure head on by cutting the wage bill while growing revenue collections to deal with fiscal imbalances.

For years, Government has been flirting with cutting the wage bill, which gobbled in excess of 90 percent of the cash budget at some point, to sustainable levels by retrenching workers and cleaning up the civil workforce inflated by thou – sands of ghost workers.Charamba said a plan is now in motion to implement staff rationalisation and general expenditure cutting initiatives while growing taxes. He said Government had already trimmed Cabinet with plans for further similar action across the board to the lowest civil servant. Economist Prosper Chitambara said while Government’s strategy is noble, a clash with civil servants is imminent in the absence of fixing cost structures. Chitambara said civil servants are the hardest hit given that their wages have nominally remained stagnant while prices shot up sharply. “Freezing wages without freezing cost struc – tures means the civil servants will bear a dispro – portionate brunt because their wages have been eroded, if I were a civil servant I would be de – manding a pay hike but then a pay hike when revenues are not doing very well pushes inflation because they will need to seek resource from the reserve bank of Zimbabwe maybe an overdraft,” Chitambara said.

“What needs to happen is for government and its workers to engage. You have seen what is been happening to prices, medical costs are high with some pharmacies only accepting US dollars,” Chitambara said, adding a viable solution must be put in place to avoid labour disputes likely to result in strikes.Annual inflation has been on an upward trajectory since the economy came out deflation in February 2017 due to foreign cur – rency shortages that saw the resurgence of the black market for currency. Premiums on the US dollar reached 300 percent by end of October, leading to price madness with some employers introducing temporary relief in the form of mon – etary incentives for their employees, but Govern – ment remains mum.According to Zimstat, Zim – babwe’s 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. The inflation rate gained 15,46 percent – age points on the September 2018 rate of 5,39 percent raising fears the country could be creep – ing back into hyperinflation. As a result of the rising inflation, government has been forced to be prudent.

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