Zim just cannot afford to pay civil servants in US dollars

Against the backdrop of civil servants in Zimbabwe threatening to go on a full-scale strike‚ the hard truth is that the country’s government just cannot afford to pay salaries in US dollars‚ as they are demanding.

But workers do not believe it.

When faced with pressing demands from striking doctors‚ Vice-President Constantino Chiwenga‚ viewed as a hardliner in the government‚ told journalists bluntly: “Government does not print US dollars.”

Now the chorus has grown: all government workers are demanding a review of their salaries by the end of January – but still the government is maintaining that it is incapacitated.

In discussion with workers‚ the government said it could not go back to paying workers in US dollars‚ as in 2009.

This is because the 2009 total wage bill was around $30m (R416m) a month. Now it’s $300m (R1.1bn) a month.

“Monthly exports are around the same figure‚ making US dollar payment impossible‚” the country’s information ministry said.

For the man on the street‚ however‚ the government rationale does not make sense.

“This is in the same vein as the billion-dollar mega-deals we were told about during the run-up to the presidential elections.

“Where are they? It’s hot air!” a maths teacher said,

“When dollarisation started‚ we were all paid a flat fee of $100 [R1,400]. From there on‚ the money was increased.

“Government should tell us how and why within nine years the wage bill has gone up tenfold‚” he said.

Economist John Robertson said Zimbabwe’s government is not bold enough to come clean at once‚ although it’s clear that the money is not there and there is no foreign direct investment (FDI) coming in.

“The money is not there!” Robertson said.

“The primary base of the state’s taxes are in bond notes.

“What is really happening is that real-time gross settlement systems are what reflect in workers’ bank accounts on pay day‚ but there is no actual money to back it up.

“We have a bad reputation out there – even borrowing is out of the picture. It’s a tough road ahead‚” he said.

While most Zimbabweans suffer‚ the economic meltdown has opened a window of opportunity for those working in the diaspora and anyone with access to foreign currency.

Although the government insists that the bond note is trading at par with the US dollar‚ on the streets $100 is equivalent to $350 [R4,860] in bond notes as of Monday morning.

“Those wishing to pay off bills are having a field day.”

Admire Tshuma‚ who works for a gold mine in Matabeleland South, said: “I bought a house via mortgage five years ago and I am left with something like $25‚000 [R347,000] to finish.

“That amount today is equivalent to $7‚000 [R97,000]‚ so I am trading hard currency on the streets to pay it off. “It’s a bargain.”

Real estate companies are now moving towards charging new clients in hard currency.

A cellphone dealer in Bulawayo said: “My lease expires next month and already I was told that I can only renew it if I commit to paying the same amount I was paying in hard currency. That’s a total rip-off!

“If they were to peg it to the prevailing black-market rate‚ I would understand – but their argument is that the bond and US dollar are at par‚ yet they don’t want to see the bond note.”

Local authorities have also started dangling forex incentives.

The Bulawayo city council started implementing a 50% debt cancellation policy for those paying their bills in foreign currency‚ while all international organisations operating in the city are now required to pay for services in forex. –

‘We have a bad reputation out there – even borrowing is out of the picture. It’s a tough road ahead’

John Robertson ECONOMIST