Government should lower employment costs to at least 40% of revenue by 2016 to increase fiscal space for priority expenditure and reserve accumulation, the International Monetary Fund (IMF) has said.
In an Article IV Report, the IMF said Zimbabwe should step up fiscal reforms that support growth, reduce poverty and accumulate international reserves in the medium term.
“Fiscal reforms need to be stepped up to support growth and poverty reduction, start generating fiscal surpluses and accumulating international reserves in the medium term,” the IMF said.
The IMF said there is need to reinforce expenditure controls, activate human resource module of the expenditure control system and have stronger oversight of state-owned enterprises.
Zimbabwe has one of the highest wage bills in sub-Saharan Africa.
An IMF payroll audit identified 38 000 staff positions with irregularities and some 14 000 ghost workers.
“The authorities agreed that expenditure measures would be required in 2011 to offset the impact of wage bill overruns and accumulated expenditure arrears.
“They explained that the wage bill was driven by civil service labour unions’ demands and the need to provide sufficient decompression of the wage scale. However, the authorities indicated that part of the wage bill overrun relative to the budget ($120 million) would be addressed by implementing corrective measures,” the IMF said.
“They would also seek to continue to review civil service wages on an annual rather than semi-annual basis, despite strong pressure from some high-level government officials for a wage increase in June 2011.”
“On Budget non-wage expenditure on social programmes remains very low and the public investment programme contains some projects with little immediate impact on social sectors, poverty reduction and growth,” the IMF said.
The Bretton woods institution sees employment costs including wage, benefits and pensions rising 45% to $1,54 billion, a figure way above the budgeted $1,4 billion.
This means that the Budget will be tilted towards employment costs.
“This could be achieved through reducing the wage bill closer to the initially budgeted amount for example the elimination of ghost workers, strict controls on hiring , initiation of a due process for irregular civil servants, mobilising off budget donor grants for some capital projects and curtailing low priority current and capital expenditures,” the IMF said.
Finance minister Tendai Biti has repeatedly said the government had no money to fund civil servants’ salary increments while Public Service minister Eliphas Mukonoweshuro has demanded a salary hike for government employees.