‘Govt’s US dollar salary confirms dollarisation’

OBSERVERS have said government’s move to pay civil servants in local currency and United States dollars signals that the country has dollarised.

Government reintroduced the local currency in 2019 after a decade of dollarisation, but it has been eroded by inflation due to low confidence and the thriving black market.

After teachers declared incapacitation and did not turn up for work since Monday when schools opened for the first term, the government increased their salaries by 20% backdated to January 1 and a US$100 hard currency on top of the US$75 COVID-19 allowance that they were receiving.

Civil servants have since scoffed at the offer, demanding the pre-October 2018 salarys of US$540.

Economists yesterday told NewsDay that paying civil servants salaries in two currencies will be viewed by other sectors of the economy as signalling dollarisation of the country.

“Government is in a dilemma. It wants everyone to accept the local currency yet it knows that other workers employed elsewhere are getting foreign currency. This agitated civil servants as they also want forex,” economist Cornelius Dube said.

“The implication for this is that some sections will still react by reading this as a signal that we are heading towards dollarisation and they begin to lose confidence in the local currency.”

Economist Vince Musewe said: “The key issue here is that this is an admittance that purchasing power of local currency is diminishing and so you have to subsidise earnings with US dollars. However, whether US$100 can make any difference in people’s lives is questionable. On one hand, any increase in disposable income increases aggregate demand which is a good thing, but it can also be inflationary.”

Former Finance minister Tendai Biti said the government’s US$100 increase ironically confirmed the end of any pretence to de-dollarisation.

Opposition Citizens’ Coalition for Change leader Nelson Chamisa urged government to fully dollarise the economy.

“Restore workers’ dignity. Government incentive measures to partially pay civil servants in US dollars are too little to guarantee a decent wage. Pay full salaries in US dollars. Just fully dollarise. The market is now effectively dollarised,” Chamisa tweeted.