Chinamasa walks on tight rope

via Chinamasa walks on tight rope – DailyNews Live Tendai Kamhungira • 8 February 2016

HARARE – Finance minister Patrick Chinamasa is walking a tightrope as he is under pressure to fulfil President Robert Mugabe’s civil servants bonus pledge, against a demanding wage bill, drought and the government’s external debts commitment.

According to reports, Chinamasa announced that civil servants will start receiving their 2015 bonuses beginning this month.

The payments will be staggered until May.

However, government has been struggling to pay civil servants their monthly salaries, amid financial constraints and now many question its capacity to pay bonuses.

According to Chinamasa, the current civil service wage bill, which chews more than 80 percent of government’s revenue, stands at a staggering $260 million, which will certainly double in the next few months as government pays bonuses.

In April last year, Chinamasa announced that government had suspended bonus payments until 2017, owing to a shrinking tax base.

But barely a week later, Mugabe made a fool of his Treasury chief after he used his typical populist, political rhetoric approach, saying bonuses had not been suspended.

The statement gave hope and delight to the “underpaid” government employees then, with  Mugabe claiming he was disgusted by Chinamasa’s announcement.

Mugabe said he had not been consulted nor had Cabinet ever discussed the issue of suspending bonuses.

“I want to make it clear that the report which was in the newspapers that bonuses were being withdrawn is not government policy,” Mugabe said then.

He added: “The Cabinet did not approve that at all and the Presidency was never consulted on the matter. We were never consulted the three of us, that is myself and the two Vice Presidents and we say that is disgusting to us and it will never be implemented at all.”

But, since last year, the government has been struggling to meet the target, forcing Mugabe to corner Chinamasa to state dates for the payment of the bonuses.

This left Chinamasa being caught within a rock and a hard surface, as government is saddled with more demanding commitments.

Zimbabwe last year made a commitment to pay $1,8 billion to the International Monetary Fund (IMF), the World Bank and the African Development Bank by May this year.

With a $10 billion external debt, Zimbabwe started defaulting on its debt to the international finance institutions in 1999 — the last year it got IMF loans — and is struggling to emerge from a decade-long meltdown that lasted until 2008 when the economy declined by as much as 40 percent.

Without any balance of payment support and starved of foreign credit, Zimbabwe’s budget is funded 100 percent from tax collections at a time when the Zimbabwe Revenue Authority missed its annual revenue collection by seven percent, after it collected $3,5 billion against the expected $3,7 billion.

Zimbabwe has run successive budget deficits averaging 2,59 percent of Gross Domestic Product (GDP) between 1990 and 2014, reaching a record low of 7, 51 percent of GDP in 1992.

The fiscal deficit was expected to narrow to below 0, 5 percent of the country’s GDP in 2015 from 2,4 percent recorded in 2014 on improved revenue collections and rationalised government expenditure.