PRESIDENT Robert Mugabe’s announcement to reverse Treasury’s recent decision to suspend civil servants’ bonuses could jeorpadise Finance minister Patrick Chinamasa’s ongoing re-engagement efforts with the International Monetary Fund (IMF) to obtain fresh funding to kickstart the free-falling economy.
by PAIDAMOYO MUZULU
According to IMF statement No. 15/101, Zimbabwe had agreed to cut its recurrent expenditure — which includes the salaries and wage bill — hence Chinamasa’s announcement last week to suspend the bonus payments was in line with that agreement.
“The commitment to eliminate the primary fiscal deficit reaffirms Zimbabwe’s intention to further raise its capacity to repay [loan arrears].
The top priority is to move resources from a too high wage bill to much-needed capital and social spending. To this purpose, the authorities intend to work toward reducing the share of revenues absorbed by the wage bill,” the IMF said.
“In addition, by amending the Public Finance Management and the Procurement Acts, they will seek to increase accountability, transparency and efficiency in the use of public resources. The reform of the tax regime for the mining sector could go a long way to mobilising additional resources, and continuing to publish audited financial accounts of the mining companies will enhance transparency.”
Harare’s external debt, at $10 billion, continues to block access to fresh funding and government feels its resolution would bring the economy on
the growth path.
It owes IMF and the World Bank $124 million and $1 billion respectively.
Chinamasa is currently in the United States negotiating with IMF officials for fresh cash injection into the country under the IMF Staff-Monitored Programme (SMP).
An SMP is an informal agreement between a government and IMF staff to monitor the implementation of a particular country’s economic reforms. It does not entail resumption of funding from the multilateral finance institution, but Domenico Fanizza, the head of the IMF mission which was in Harare to review the SMP progress last month, said Zimbabwe had developed a roadmap to seek debt rescheduling by the Paris Club, an informal group of official creditors whose role is to find co-ordinated and sustainable solutions to the payment difficulties experienced by debtor countries.
Mugabe on Saturday in an off-the-cuff speech said the announcement to suspend bonuses was invalid and criticised Chinamasa’s statement because of what he termed lack of consultation with the Presidency. This came after Chinamasa last week announced that government had suspended civil servants’ bonuses for the next two years to tame the ballooning wage bill and create fiscal space.
Zimbabwe has since 2010 been engaged in negotiations with the Bretton-Woods institution for fresh funding provided it has fully implemented the agreed SMP.
Former Education minister Senator David Coltart yesterday said Mugabe’s weekend remarks would further convince the IMF that Zimbabwe had no fiscal discipline and therefore was not ready for new capital injections.
“President Mugabe’s announcement this weekend, whilst Chinamasa was in Washington doing his best to woo the same community, will elicit a profound sense of déjà vu in the IMF and World Bank,” Coltart said. “I have absolutely no doubt that Chinamasa timed his statement on bonuses to coincide with his visit — to show the IMF that the Zimbabwe government is serious about tackling government spending and debt.”
Mugabe’s statement repudiated Zimbabwe’s commitment to the IMF in a letter that was jointly signed by Chinamasa and Reserve Bank of Zimbabwe governor John Mangudya last year.
The pair made a commitment that the country would reduce recurrent expenditure through a salary and recruitment freeze and try to contain the wage spiral by introducing labour market flexibility.
“In addition, we will maintain the hiring freeze in Government which started in July 2012, while allowing some limited flexibility in filling critical vacancies that cannot be filled through internal mobility,” they wrote.
They added: “Finally, we have embarked on the reforms of our labour laws in 2014, in order to make our labour market more flexible, investment- and growth-friendly. To this extent, a Cabinet committee chaired by the Minister of Public Service, Labour and Social Welfare (Prisca Mupfumira) has been constituted to co-ordinate the review of our labour laws.”
Ironically, the pair of Information minister Jonathan Moyo and Presidential spokesperson George Charamba swiftly moved to support Mugabe despite them being at Chinamasa’s Press conference at Munhumutapa Building last week where the bonus suspension was announced.
Contacted for comment via his Twitter account, Moyo said: “Not sure what you mean by spin, but whatever you mean, the President is the boss & his word is final. So there you have it!”
Charamba also distanced himself from the decision according to online agencies, saying: “He [Chinamasa] is part of a government led by President Mugabe. He is a junior of the President. So when the boss speaks, that’s the end of the story. [It is] as straight-forward as that.
“Remember, I was also part of the line-up that made that announcement. So we are all duly corrected by His Excellency.”
Chinamasa yesterday apologised for the statement, but reiterated that the country’s economy was not sound and could not support the kind of recurrent expenditure caused by a bloated civil service which currently chews 82% of the National Budget.
In February, Zimbabwe was taken off the list of countries subjected to monitoring by the Financial Action Task Force (FAFT) after improving its money laundering regime.
“Our intention is that by this time next year we should be entering the new phase of clearing our arrears and opening the floodgates of new development financing, FDI and other financial flows that will reduce poverty in our country,” Chinamasa said then.
The next assessment is in September.
Under the current SMP, the third since 2013, the policy reform agenda focuses on balancing the primary fiscal accounts, improving the investment climate, restoring confidence in Zimbabwe’s financial sector and garnering support for a strategy to clear arrears with multilateral institutions.