Reduce wage bill: IMF tells govt

Source: Reduce wage bill: IMF tells govt – DailyNews Live

Gift Phiri      8 July 2017

HARARE – The International Monetary Fund has repeated its calls for
President Robert Mugabe’s broke government to retrench its workers further
in line with reforms aimed at reducing its huge wage bill.

This comes after the executive board of the IMF concluded the Article IV
consultation with Zimbabwe this week.

The IMF said Zimbabwe must cut its wage bill from over 90 percent of the
budget, but government has not yet shown signs that it will retrench its
workers anytime soon.

Cutting wages would allow government to free money to develop its failing
infrastructure, including roads and power-generating plants, as well as
social services like health and education.

“Budgetary operations were crowding out the private sector, and the
expenditure profile tilted towards employment costs and unsustainable
agricultural support was inhibiting investments in other priority sectors,
particularly infrastructure and social outlays.

“Directors …noted that public sector employment costs remain at an
unsustainable level, constraining social and infrastructure spending,” the
IMF said.

“Directors encouraged the authorities to engage only in well targeted,
cost effective, and properly budgeted support to the agricultural and
other productive sectors.

“The ongoing deficit financing modalities, particularly the credit from
the central bank, are unsustainable and have significant potential for
generating inflationary pressures.

“The marked increase in public debt is crowding out private sector
activity, aggravating liquidity shortages, and exacerbating debt
distress,” said the IMF.

In April, Finance minister Patrick Chinamasa said government had met all
conditions to clear arrears to the World Bank and African Development
Bank, paving the way for possible future funding from the IMF.

Chinamasa said in a statement that facilities negotiated by the Reserve
Bank of Zimbabwe to repay the $1,75 billion arrears had been “scrutinised
and scrutinised” by the World Bank and AfDB, who were satisfied.

“Clearance of debt arrears is expected to open the door to foreign finance
inflows and possible debt treatment by the Paris Club and non-Paris Club
Bilateral Creditors through an IMF financing programme,” Chinamasa said

Zimbabwe has been placed under a Staff Monitored Programme(SMP) a
“friendly” programme by the IMF aimed at helping government improve its
economic policies.

The SMP is a major step for Zimbabwe in normalising ties with the IMF,
which in 2003 suspended Harare’s right to vote its resolutions – a step
towards expulsion from IMF membership – over policy differences with
Mugabe and non-payment of arrears.