The government is prepared to take ‘hard’ measures to reduce its crippling wage bill, which consumes 82 percent of its total revenue and to amend labour laws to make it easier for companies to retrench, finance minister Patrick Chinamasa said at the weekend.
Reduction of the high wage bill is among key targets under the International Monetary Fund’s staff monitored programme (SMP), an informal and flexible instrument for dialogue between the Fund staff and a member country on its economic policies.
Zimbabwe undertook the programme in 2013 and under the current SMP the policy reform agenda focuses on balancing the primary fiscal accounts, improving the investment climate, restoring confidence in the financial sector and garnering support for a strategy to clear arrears with multilateral institutions.
Government has resisted reducing its over 235 000 workforce, but with the 2015 recurrent expenditure seen at 92 percent, economic growth slowing down and expected to weaken further in the year after poor rains and weak commodity prices, Chinamasa said it was time for the government and companies to face the harsh reality.
“We needed to see whether we are going forward hence the need to take hard decisions which are reduction of the wage bill in relation to revenue collections and reforming the labour laws to build flexibility so that companies which want to streamline their staff can do so without liquidating,” Chinamasa said on the sidelines of the Zambezi River Authority Council of Ministers meeting in Victoria Falls on Friday.
Both government and business have to adjust to the current economic reality to survive, he added, but refused to say if the state was considering reducing its workforce.
“Cabinet mandated the Public Service Commission and us (finance ministry) to look at the wage bill and identify possible ways that can be used to effect its reduction. We have been holding meetings whose details I can’t give now because recommendations have to go to Cabinet first,” said Chinamasa.
He said the recommendations will soon be presented to Cabinet.
“Our economy is resilient and we are confident we will overcome liquidity challenges arising from sanctions, failure to access capital and financial assistance from the world and unavailability of lines of credit. We know however we will have a way out of these challenges,” he said.
The economy, he added, has also been affected by price distortions and abuse of the United States dollar.
“Already price reductions are taking place in the economy as we give proper value to the US dollar. Firms should look at the cost effective structures to make sure they survive and they have to scan the environment and adapt,” said Chinamasa.- The Source
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