Home Business Zimbabwe to cut 25 000 government jobs in bid to reduce wage bill

Zimbabwe to cut 25 000 government jobs in bid to reduce wage bill

by Lex Vambe

It is not in doubt that Zimbabweans, many of whom have taken to the streets in protest against President Robert Mugabe’s management of the economy, have no illusions about their predicament.

But nothing could have prepared them for the bleak set of numbers presented by Finance Minister Patrick Chinamasa as he tabled his mid-term fiscal policy review in Parliament today.

Chinamasa revealed government fears that the economy could contract this year, despite officials publicly sticking to a 2.7 percent growth target until a few months ago.

“When we started the 2015/16 agricultural season, the economic outlook was gloomy…at that stage, revisions of the economic growth rate for 2016 were pointing to the negative,” Chinamasa told Parliament.

A less-than-expected decline in agriculture and a rally in mining will, instead of negative growth, see the economy expand by 1.2 percent, Chinamasa said.

In May, Treasury had revised the 2016 GDP forecast to 1.4 percent. Analysts have charged that government forecasts of growth in an economy plagued by a bank note crisis, drought-induced food shortages and insignificant investment, are unrealistic.


However, what’s undeniable is that Zimbabwe’s economy is back in crisis after a brief respite that started in 2009 when the country dollarised and tamed hyperinflation as a power-sharing government that significantly eased political tensions.

Now, the benefits of dollarisation seem to have run out and political tensions are rising, triggering a series of street protests and strikes over the past few months.

Government revenues continue to fall; collections amounted to $1.692 billion in the first half of 2016, against the targeted $1.876 billion.

Chinamasa said he now expects full-year revenue to be $3.755 billion and not the initial target of $3.85 billion.

Expenditures, to June 30 2016,overshot the budget by $308 million, to reach $2.32 billion.

Of every dollar government collects as revenue, 97 cents goes to pay wages, Chinamasa said, while issuing a chilling warning. Government, which has over the past three months struggled to pay its workers on time, faces the prospect of a full-scale default.

“The outlook, based on the status quo, points to a situation where projected revenues fall short of meeting employment costs,” Chinamasa said, adding that Cabinet had approved plans to reduce the government wage bill by $118 million by the end of 2016.


Chinamasa proposes to reduce the civil service, which he says stands at 298 000 currently, to 273 000 by the end of 2017.

With virtually every revenue dollar going to pay salaries, government has resorted to borrowing, running up a $632,2 million budget deficit in the process.

“Failure to contain the budget deficit will worsen the situation to a year-end level of over $1 billion,” Chinamasa told a stunned Parliament.

Government had forecast a $150 million budget deficit for 2016.

“The budget deficit is being financed by way of borrowing primarily through issuance of Treasury Bills. This is crowding out credit to the private sector, thereby stifling new domestic investment and growth,” Chinamasa added.

Exports amounted to $1.1 billion in the first half, a 9 percent decline on the corresponding period of 2015. Imports also declined to $2.5 billion up to June 2016, compared to $2.9 billion in the same period of last year.

Remittances by non-resident Zimbabweans, a key source of liquidity, were $387.9 million in the first half of 2016, 15 percent lower than the $457.8 million registered in the first six months of 2015.”

Chinamasa identified as key sources of Zimbabwe’s economic malaise: low levels of production and the attendant trade gap, insignificant foreign direct investment and lack of access to international finance due to huge arrears.

He made a case for the continuation of Zimbabwe’s efforts to re-engage international capital and Western governments that fell out with the Mugabe government nearly two decades ago over a violent land redistribution drive as well as charges of electoral fraud and human rights abuses.

The re-engagement process has appeared imperiled in recent months, amid a vicious government crackdown on opposition protests. Chinamasa, however, urged the government to stay the course.

“It is therefore critical that we complete the remaining steps on arrears clearance in order to unlock resources from the IFIs and bilateral co-operating partners,” he said.- The Source

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