IMF warns Zimbabwe against pay hike for civil servants

The International Monetary Fund’s resident representative in Zimbabwe has warned the government against boosting wages for state workers after the introduction of a new currency pushed up inflation and reduced spending power to a 10th of what it was as recently as February.

In the six years to 2016 Zimbabwe boosted pay for its about 400 000 civil servants to a level where their pay accounted for more than 90% of tax revenue compared with 40% in 2010, Patrick Imam, the IMF’s representative, said.

“The government wage bill is now on a sustainable footing,” he said in response to questions. “Looking ahead, it is crucial that public wage growth be aligned with economic growth and government revenue.”

This puts the IMF at odds with Finance Minister Mthuli Ncube, who said in an interview that he’s in favour of boosting wages in both the public and private sectors to restore living standards and create consumer demand.

Ncube has also said he expects the economy to contract this year for the first time since 2008.

“What people are feeling is really wage compression,” he said. “Prices adjusted instantly to the exchange rate, but wages have been too slow to catch up with the adjustment. The issue is about wage adjustment and I’m a big champion of wage adjustment.”

In February the government said a quasi-currency known as bond notes, and RTGS$ in their electronic form, would no longer trade at parity with the US dollar and in June it reintroduced the Zimbabwe dollar, which it abolished in 2009 after a bout of hyperinflation.

The exchange rate is now about 10 to the US dollar and the price of goods bought by middle class workers, such as civil servants, has risen in tandem as these are mostly imported.

Officially annual inflation is at 176%, but some analysts have estimated that it’s as high as 570%.

Public Service Minister Sekai Nzenza said the government is entering into negotiations with civil servants this week to negotiate a salary that meets the current cost of living.

The Herald today said it was expecting a huge payout for civil servants.

The government, under pressure from the opposition Movement for Democratic Change, might move in to pacify restless civil servants and thus cool the temperatures while it continues with its austerity measures which some in industry say are beginning to pay off. – Bloomberg/Own

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