Chinamasa in wage bill Catch-22

Chinamasa in wage bill Catch-22 April 3, 2014 Zimbabwe Independent by Kudzai Kuwaza

FINANCE minister Patrick Chinamasa’s revelations that he cannot reduce the public sector wage bill to meet debt reduction targets set by the International Monetary Fund (IMF) have been received mixed views from analysts.

A delegation from the IMF was in the country last month as part of the Staff Monitoring Programme (SMP) it has with the Zimbabwean government. The SMP is an informal arrangement between a country’s government and the IMF to monitor the implementation of the government’s economic programmes.

Chinamasa told the delegation that he could not cut the wage bill of the public sector which currently stands at about 70%.

More than 75 000 ghost workers were unearthed in the civil service through a comprehensive audit carried out by Ernst and Young (India) in 2011. Most of them remain on the wage bill.

“Addressing it overnight would mean very drastic measures which I indicated to them (IMF) I am not prepared to take. That would mean retrenchment of civil servants,” Chinamasa said.

Economist John Robertson said Chinamasa was bogged down by constraints, adding his failure to slash the wage bill would continue having adverse effects on the country.

“The decision will leave the country very weakened,” Robertson said. “Chinamasa is reeling from constraints. Government cannot afford retrenchment packages.”

He said the major problem was the ballooning of the civil service wage bill over the years.

“Previously one out of every 10 workers in the formal sector was a civil servant but now one out of every three workers in the formal sector is a civil servant, making it hard to raise money to pay wages,” Robertson said.

He said the problem was further aggravated by the large numbers employed in some government ministries. For instance, he said there are 7 700 workers in the Ministry of Indigenisation. Robertson said the existence of government employees in ministries that should not even exist worsened the situation.

He said there was need to amend the current labour law to make it easy for firms to retrench employees that have become unproductive.

“The principle of retrenchment packages should be challenged,” Robertson said.

However, economic analyst Takunda Mugaga believes that slashing the wage bill by reducing the workforce could prove counterproductive.
“Chinamasa’s hands are tied,” Mugaga said. “Retrenchments are not an option as it could cause upheaval in the country.”

He said the IMF was “insincere” in its approach to this issue as it would only increase the number of people unemployed in the country.

Mugaga said the Breton Woods institution should help the country with solutions to offset the negative balance of payments position burdening the country’s economy as well as putting in place measures that will aid the turnaround of the economy.

Economist Godfrey Kanyenze said Chinamasa’s comments that he would not be able to cut the wage bill of the public service would only further delay re-engagement with the IMF.

“As you are aware this was one of the markers of the SMP. If you cannot meet this, then re-engagement will be delayed,” he said. “What the IMF is waiting for is a serious partner on the other side of the table.”
He said delayed re-engagement with the IMF would also delay lines of credit, worsening the country’s parlous economy.

“Chinamasa is now reaping the sour grapes from the populist policies. These policies are coming back to haunt the government and the hole we are in has been dug deeper,” Kanyenze pointed out.

He called for a strategy to cut down the number of ministries “to avoid creating a huge octopus that develops tentacles that we cannot feed.”