THE recent announcement by the ministry of Finance and Economic Development on November 3, that all civil servants’ 2021’s 13th cheque will be paid in United States dollars has sparked a lot of debate and emotions within different sectors of the economy.
In the announcement, it is stated that the 2021 civil servant’s bonus will be paid in foreign currency at 100% of the pensionable emoluments capped at a maximum of US$700.
Those entitled to a bonus exceeding US$700 will have their balance of the bonus payable in the local currency.
In the letter written by the ministry of Finance’s permanent secretary George Guvamatanga to the three bodies that hire and regulate civil servants, it was noted that the government will pay the bonuses in a foreign currency as they have noted the plight of the civil servants, and this is a bid to try and cushion the civil service from the fluctuating exchange rate currently being experienced in the country.
According to state controlled media, the government is expected to pay over US$90 million in these bonuses.
This stance by the government was very much welcomed by the majority of the civil workforce as it will go a long way in cushioning them as their salaries have been reduced to unimaginable levels.
This move may also go a long way in easing pressure on the parallel exchange rate which normally spike to higher levels during the festive season.
The payment of the bonuses in a foreign currency might also to a larger extent ease some pressures on the parallel exchange rates, with more people having access to the US dollar, there might be an injection of the US dollar in the market which may actually reduce pressure on the parallel market thereby reducing the parallel exchange rate.
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The government has been commended even by workers unions, who welcomed the move to ascertain the payment of bonuses this year in a timely manner as well as in a currency that is preferred by many workers.
However, there are economic implications that may be deduced by this move.
There is some cause for concern with this current move the government has taken.
Though the payment of the bonuses is very welcomed from a humanistic point of view, the government might be signalling that the RTGS is an unsound currency and the US dollar is the preferred currency to solve the problems currently being faced by our economy.
The fact that the government has opted to use the US dollar to cushion its workforce clearly shows that the authorities know that payments of salaries in the local currency is not in essence fair to its workers.
This move also shows that the government rather opts for the use of the US dollar to cater for the welfare of its workers and does not trust its own currency.
This is also puzzling as to why the government has opted to the use of the US dollar rather than its own currency since it has been adamant that RTGS is a stable currency and citizens should promote its use.
Government is collecting taxes in foreign currency and businesses are charging in foreign currency.
It will only be prudent that those operating in foreign currencies should also pay their workers in foreign currency, government included.
The government is receiving foreign currency from payments for services, taxes and customs duties and by October 2021, the government had recorded over US$7.2 billion in foreign currency receipts, which resulted in a positive current account of about US1.7 billion.
This means that the government has the means or should at least try to pay part of its salaries in US dollars.
On November 14, 2021 the state controlled media reported that Finance minister Ncube highlighted that the payment of the bonuses in the US dollars was necessitated by the fact that the country is experiencing high levels of inflation due to pressures from the parallel market.
Since the minister has highlighted that the foreign currency black market is putting pressure on the local prices, there is now need to look at also cushioning the civil servants beyond the 2021 bonuses by adjusting their salaries to at least match the increases in the inflation rates as it will not make much difference as their monthly salaries still remain the same and pegged in the local currency.
Without such a move, this will just be an extremely temporary measure of cushioning government workers, come January 2022, the salary woes will start again.
There is also the issue of mistrust the public has with the government. In 2020, when the government introduced the Covid-19 allowances for the civil servants’, banks opened nostro accounts for all civil servants when the Covid allowance was being paid.
It was announced that the civil servants will be able to withdraw their allowances in hard cash, but what then took place was far from what was promised.
The government decided to convert the US$75 for all to local currency and the civil servants could not withdraw the money as hard foreign currency.
Many are sceptical as history has shown that there is no guarantee that the bonus will be withdrawable as foreign currency despite assurances by Ncube that withdrawing the bonus as foreign currency will be possible.
There is need for the government to take a decisive step as to which currency is suitable for the payment of salaries of the civil servants to avoid sending mixed signals to the market players.
As it stands the government seems to be contradicting itself as not so long ago Ncube was quoted saying that the government does not have the capacity to pay its workforce in foreign currency and doing such would be detrimental to the economy at large.
The same minister then is quoted saying that foreign currency is able to cushion the government workers from the increased inflation and fluctuating exchange rate that is being experienced in the country.
If the government then feels for its workforce, it should then just do what is in both the interest of itself and its workers or at least meet halfway to come up with a sustainable solution that is in the best interest of both parties involved.
- Tariro Chivige is an economist
- These weekly articles are coordinated by Lovemore Kadenge, independent consultant, past president of the Zimbabwe Economics Society and past president of the Chartered Governance & Accountancy Institute in Zimbabwe. Email address; [email protected] and Mobile No. +263 772 382 852\
