Salary reforms answer to cash shortages: RBZ
THE Government should develop “bold and stern” measures of reducing expenditure with special focus on the salary bill while increasing industrial production as a possible way of dealing with the cash crisis, Reserve Bank of Zimbabwe Governor Dr John Mangudya has said.
Long queues at banking institutions which were only prevalent at month ends have become common while most financial institutions have continued to review their maximum withdrawal limits to as low as $100 per day. In a wide ranging interview yesterday, Dr Mangudya said the long queues at banks were a symptom of high Government expenditure which needs to be cut and the money invested in production to boost exports. He said it was unsustainable that 85 percent of the revenue that the Government was generating was now catering for civil servants salaries. He said the ideal percent of salaries ratio to revenue should be 40 percent.
“During pay days, there are bound to be long queues. The Government is the largest employer and people will want to be paid in cash. The problem is that our expenditure is too high because there is no Government or a company which can spend the bulk of its revenue on paying salaries. The Government is spending more than 85 percent on civil servants’ salaries and that is disastrous,” said Dr Mangudya.
The Government is already carrying out a staff rationalisation exercise to reduce and realign its work force as a way of dealing with the huge wage bill. He said cash problems were also to do with the mentality of people who want to use cash adding that “people want cash but Government does not receive payments in cash.”
He said: “People should note that when companies pay their tax to Zimra they use RTGS (Real Time Gross Settlement) not cash but civil servants will want their money in cash. Cash comes from exports and that is
the money that will be used to pay civil servants. Civil servants don’t import cash but we only get cash through exports which include exporting tobacco, minerals and other products.”
Dr Mangudya said the Government has the potential to turn around the economy because the country is endowed with many resources that can be harnessed for production.
“We have plenty of gold and diamond which God gave us and those should be harnessed to generate more exports. The introduction of bond notes is meant to incentivise businesses so that they can export and increase foreign currency and that is healthy for our multi-currency system,” he said.
“As a country we need bold and stern sustainable solutions which will be hinged on production, production and production. Production is important in that it increases exports, reduces dependency on revenue imports, increases fiscal space and Government expenditure will also be low.”
Dr Mangudya said the adoption of the multicurrency system was under threat, as it was yet to be widely adopted by people who are addicted to the US dollar and rand only.
“People are addicted to the US dollar and rand. Unfortunately we don’t print that money instead we import it. What we are going through is not complicated because the situation can be reversed. As I said, we should reduce expenditure and increase production. Without production we are not going to solve this problem,” said Dr Mangudya.
He also advised people to embrace plastic money which is the modern and best practice in doing business.
“There is no need for people to be in long queues because they should just use plastic money. Through their cards, they can buy anything they want so that they cannot stand in queues.”
The country has been experiencing cash shortages which has seen queues at the banks resurfacing. The Government accuses some businesses of hoarding the money starving the banking institutions. Because of the strengthening of the dollar against major regional currencies, there has been suspicions that the countries are fishing the dollar from Zimbabwe to boost their foreign currency reserves.