Zimbabwe headed for deeper crisis

Source: Zimbabwe headed for deeper crisis | The Financial Gazette September 15, 2016 By Nelson Chenga and Shame Makoshori

GOVERNMENT moved to curb social upheavals this week by reversing a policy announcement that sought to slash salaries and stop bonus payments to civil servants, at the risk of plunging the country deeper into economic turmoil.
Facing its worst public protests in the past few months triggered by the country’s failing economic policies, government trashed austerity measures introduced by Finance Minister Patrick Chinamasa last week, instead, opting to play to the gallery to avoid a nationwide shutdown.
Despite having been seen as a masterstroke in government’s last ditch attempts to pull the country’s economy from the brink, government spectacularly backtracked on the decision announced by Chinamasa, in his Mid-Term Fiscal Policy Review statement last week.
The volte face immediately spurred a feeling of déjà vu among analysts and ordinary Zimbabweans, especially coming 18 months after a similar government backpedal on a far-reaching policy terminating civil servants bonuses to reduce an unsustainable wage bill that has so far this year chewed 96,8 percent of total revenue.
Presenting the Mid-Term Policy statement, Chinamasa indicated that government’s wage bill rationalisation measures had since January this year yielded savings totalling US$64,4 million, critical revenue that would help the country to weather the storm if further increased.
So informed by this encouraging development, he said government would, with effect from next month, reduce salaries and allowances by five to 20 percent for all civil servants, starting with deputy directors to ministers.
He also said civil servants would forego the 2016 and 2017 bonuses.
“The proposal will translate to savings of around US$180 million per annum, which will be channelled to essential expenditures relating to the drought,” said Chinamasa, adding that the expenditure rationalisation measures were meant to reinforce the supply side measures proposed in the Mid-Year Fiscal Policy Review, sustain the wage bill, while creating scope for financing drought, debt service and other capital and operations programmes.
But yesterday, the nation woke up to an announcement that Chinamasa’s measures were illegal.                                                              The Finance Minister faced similar embarrassment in April last year when President Mugabe quashed his decision not to pay civil servants the 2015 bonuses.
In a statement sent through the Ministry of Information, Media and Broadcasting Services, government said: “After extensive deliberations, cost-cutting measures relating to the civil service were rejected and the position of Cabinet is that the Minister of Finance and Economic Development did not take into account the rejection by Cabinet earlier on.”
Analysts canvassed for comments opined that government needed to be sincere and consistent in implementing its policies if the country was to improve its economic standing.
Mtilikwe Financial Services chief executive officer, Kingstone Khanyile, said the whole drama around the present policy reversal was politically motivated and meant to help the ZANU-PF government retain voters ahead of the 2018 elections.
“The question is that of political will. Is there any political will in government to implement the policies that are announced? The other thing is that we appear to be now running a parallel government. What is surprising is that when these policies are made, there is wide consultation in government. And we must remember that it is Chinamasa’s prerogative to come up with policies that allow economic growth and promote foreign direct investment,” said Khanyile.
He added: “And when me makes these policies, there are assumptions that have to be met, such as the 1,2 percent growth that he is expecting. Now, if his direction is suddenly changed, it means these targets may not be met. \
“The reason for this reversal is simple — government wants to retain votes. Remember also that you cannot go to the bank to borrow in order to pay salaries. That is why there were proposals for pay cuts.”
Chief economist at the Labour and Economic Research Institute of Zimbabwe, Prosper Chitambara, said government’s flip-flopping antics would further dent the country’s already damaged confidence.
“The first thing is that this will affect confidence levels in the economy. The second thing is that it has a bearing on the creditability of the government itself. This is a classical case of policy inconsistence. It creates uncertainty and instability in the economy. It does not augur well for prospects for investment,” Chitambara observed.
Media analyst Henry Harry Makowa, however argued that the decision to reverse a fiscal policy decision was rational and in the best interest of the country.
“…there is no policy inconsistency from the State (here) as you are aware that government functions on the basis of mature, well thought-out rational public policy interventions as they relate to the public’s best interests.
“The State correctly noted, maturely reasoned and communicated a position which resonates with the economic souls of the citizenry,” Makowa said.
The dice has already been cast and it is difficult to see how government hopes to weather the storm after the key policy measures.


  • comment-avatar
    Joe Cool 6 years ago

    This entire charade of announcement and then contradiction was planned and intentional. However, having a fairly rational mind, I have no idea of what it was intended to achieve.