By Bernard Mpofu and Kuda Chideme, HARARE, July 30 (The Source) – Zimbabwe’s finance minister on Thursday said government plans to cut the public sector wage bill to 40 percent of total revenue from the current 80 percent, signalling a move to reduce its bloated civil service, amid a lower economic growth forecast of 1,5 percent from the initial 3,2 percent.
Presenting the Mid-Term Fiscal Review in Parliament on Thursday, Patrick Chinamasa said 83 percent of government’s $2 billion costs were going to the salaries of its 554,000 employees.
The reduction of the wage bill is a key government target under the International Monetary Fund-monitored Staff Monitored Program (SMP), as it seeks to reform in a bid to unlock foreign funding.
A previous attempt to reduce the wage bill by removing bonuses for civil servants earlier in the year was reversed by populist President Robert Mugabe, who publicly rebuked Chinamasa for not consulting him over the pay measure.
“Cabinet has given a directive to the minister responsible for the public service and the minister responsible for finance to urgently propose remedial measures to gradually bring down the share of the wage bill in the budget from over 80 percent to under 40 percent,” Chinamasa.
“Cabinet will be considering the full package of necessary proposals in the next couple of the weeks. The above interventions to manage the wage bill are meant to create the fiscal space necessary to enter medium to long term growth for sustainable platform for improved remuneration.”
He said civil service commission has already completed the physical headcount for all civil servants.
The finance minister also lowered revenue projects in the wake of company closures and job layoffs triggered by the lowest economic activity in five years.
Revenue is now seen at $3,6 billion from $3,99 billion while expenditure has been reduced to $4 billion from $4,11 billion.
Tourism is seen growing by five percent, mining by 3,5 pct on higher mineral output despite poor commodity prices. However, he said the 2014/2015 agriculture season performance was below expectations owing to poor rains, and the sector would decline by 8,2 percent.
To stimulate growth in the mining sector, Chinamasa proposed to reduce royalty for small scale gold miners to one percent from three percent.
“Mining developments during the first half of 2015 indicate stronger performance to the end of the year, with mining growth projected above 3.5 percent against the initial projection of 3.1 percent,” said Chinamasa.
“The upward trend in mineral output during the first half of 2015 was largely on the back of significant increases in gold, nickel, platinum and palladium production.”
He said the country’s external sector remained precarious with rising imports outstripping exports. Official figures show that exports account for 50 percent of the country’s liquidity.
“Data from Zimstat indicates a 0,4 percent growth in exports receipts for the six months to June this year. Total exports for this period amounted to $1,3 billion compared to $1,22 billion recorded in the corresponding period last year,” Chinamasa said.
Imports for the same period stood at $3,1 billion from $3 billion recorded in the corresponding period last year, he said, adding that imports are expected to grow by six percent this year.
The finance minister announced a cocktail of measures to protect local industry which include a ban on second hand clothes and the scrapping of rebate on imported basic goods that can be produced locally from August 1.
He increased surtax on imported second hand vehicles of five years and older to 35 percent from 25 percent in a bid to protect local car assemblers and contain the growing import bill.
Chinamasa said Treasury will also float state enterprises bonds on the Zimbabwe Stock Exchange to stimulate activity on the capital markets. This follows the underperformance of the equities market in the first six months of the year which saw the local bourse lose $1 billion in valuation, compared to the same period last year.
“In order to stimulate the capital markets I am proposing that all government and parastatal bonds be listed on the stock exchange. The debt market is an ideal platform for government to secure long term financing for infrastructural projects,” said Chinamasa.
“Government, through the Reserve Bank will also facilitate the registration of ratings agencies in the country to ensure that the listed bonds would have been rated.”
On the country’s debt, Chinamasa urged state-owned enterprises and government departments to exercise restraint in borrowings saying the stock of government debt had risen to $8,4 billion with external debt accounting for $6,7 billion, about 40 percent of the gross domestic product.
“This reinforces the need for the 2015 Budget to contain fiscal pressures, including exercising restraint on Treasury bill issuances, as maturing Treasury bills impact on domestic debt service,” he said.
“Furthermore, measures have to be put in place to increase the tenure of domestic debt instruments, including on outstanding Reserve Bank creditors.”