IMF cautions govt over pay demands

Business
BY NDAMU SANDU THE International Monetary Fund (IMF) says the dollarisation of the economy has improved Zimbabwe’s revenue coffers but said the challenge now is to contain spending, particularly on public sector wages.

Sharmini Coorey, deputy director of the African Department at the global lender told journalists in Johannesburg on Tuesday that the use of multi-currencies has stemmed hyperinflation and imposed fiscal discipline.“The challenge really is to contain spending and particularly wages, public sector wages. “This is a long-standing issue in Zimbabwe and it continues to be a challenge to get the consensus to hold back public wage increases,” Coorey said. IMF recommendations to halt public wages increase is likely to incense the civil servants who are pushing for a review of salaries. Civil service unions are pushing for a minimum salary of US$502 per month for the lowest paid government worker. Government on the other hand says it is constrained as the resources available cannot meet its workers’ expectations. The government’s salary bill has been chewing nearly half of the budget leaving little funds to other expenditures such as infrastructure and social services. In 2009, the public service wage bill was 47% of the total budget and 9, 2% of the Gross Domestic Product (GDP). This was expected to rise to 54, 5% of the total budget and 15% of GDP by end of last year. In the 2011 budget, Finance Minister Tendai Biti promised to maintain the wage bill within the levels which do not compromise financing of such other essential programmes as infrastructure, health and education.He said the wage bill as a percentage of the total budget will be reduced to 45% this year and will constitute 14, 5% of GDP. “This reduction will be made possible by implementing recommendations from the Civil Service Audit and taking advantage of the better performance of GDP and revenues,” Biti said in the 2011 budget statement. The medium term target is to reduce the wage bill to the desired levels of 30% of the total budget and 10% of GDP.IMF has been pushing government to rein in expenditure, especially on the wage bill. After its Annual Article IV consultation last year, the IMF team said government should reduce the wage bill by 15% by 2011.It said the wage bill could be reduced through elimination of ghost workers, illegal hires, freezing of recruitments and below inflation wage increases in 2011 and 2012. “The 2011 projections see an increase in employment costs by US$200 million, so a 15% reduction over 2010 levels means US$338 million in savings over the baseline,” it said.“Probably US$55m to US$85m can come from elimination of ghost workers, but firing illegally hired or under-qualified workers will be politically and legally difficult.”