Zimbabwe tax kitty running dry, minister tells parliament
THE government of President Robert Mugabe runs the risk of failing to keep up with the payment of public servants’ salaries by year-end.
This was the diagnosis given by Zimbabwe’s finance minister, Patrick Chinamasa, in his midterm fiscal policy review statement delivered to parliament in Harare on Thursday. He said the matter of the wage bill was “urgent”.
Chinamasa’s frank assessment of the possibility of coffers running dry puts Zimbabwe’s government in a quandary at a time when public anger over its mismanagement of the economy continues to swell.
Public protests have been on the increase as pressure piles on Mugabe’s administration to reform the economy.
In his address, Chinamasa revealed that between January and June this year, salary obligations had taken up 96.8% of revenue.
“The wage bill remains a major component of high expenditure. From January to June this year it was 96.8% of revenue. The outlook, based on the status quo, points to a situation where projected revenues fall short of meeting employment costs,” he said.
Chinamasa said revenues would come in 9% lower, at $3.775-billion (about R54-billion) against an initial target of $3.85billion. The government employs more than 500 000 people — who, since July, have had to put up with delays in salary payments.
The main revenue source for the government is tax collection, which has been strained as companies fold.
Economists and political observers intimate that breathing space would be afforded only if the government were to retrench en masse in the bloated public service — a move that carries political risk as the country approaches decisive elections in 2018.
“This is not a deep hole — this is the total collapse of an entire country. They literally just pay wages,” said Tendai Biti, the former finance minister.
Mugabe needs the support of public servants to see him through the elections, as traditional allies such as war veterans are among those who want him to step down.
With little room to manoeuvre, Chinamasa could only point out that the cabinet had approved “civil service rationalisation”.
As part of containment measures, 25 000 employees will be laid off and bonuses have been scrapped for the next two years, resulting in savings of $360-million.
This is the second time Chinamasa has proposed cancelling bonus payments for public servants.
Last year, his decision to do so was reversed by Mugabe, who rebuked his finance minister for making unilateral decisions without consultation.
The latest round of retrenchments and the bonus freeze are likely to fuel a fresh face-off between the government and its employees.
This week, Japhet Moyo, secretary-general of the Zimbabwe Congress of Trade Unions, said Chinamasa had conveniently avoided dealing with the root of the problem.
“Our fear . . . is that he is likely to go for people on the lowest rung. The focus must be on how many ministers we have, the perks they have, and such things. At the very top is where there are the real problems,” said Moyo.
Meanwhile, despite the precarious liquidity situation, Chinamasa said the country would retain a multicurrency system.
“We need to restore the basis of the multicurrency system by accepting all currencies rather than relying entirely on the US dollar,” he said.
The US dollar is used in 95% of transactions, with the rand taking up the rest.
Members of the opposition Movement for Democratic Change jeered Chinamasa and asked him to speak on the bond notes — feared by most Zimbabweans as a veiled return of the defunct Zimbabwean dollar.
Chinamasa avoided talk of the bond notes altogether. The new currency, which monetary authorities say is an incentive for exporters, will come into circulation next month.
Zimbabwe’s economy is expected to record growth of 1.2% from earlier forecasts of 2.7%, with Chinamasa highlighting that a “lower-than-expected decline in agriculture of -4.2%” was a factor.
Maize supplies would last the drought-hit country eight months, he said.
Chinamasa warned the manufacturing sector to make use of the “window of opportunity” offered by Statutory Instrument 64 of 2016 — which restricts imports into the country — “to increase capacity and compete with other products” .
This is not a deep hole — this is the total collapse of an entire country