President Mugabe’s cash-strapped government has proposed a raft of cost-cutting measures including cancelling civil servants’ 2016 bonus payments, taxing their allowances and cutting salaries for senior government officials, including ministers, to reduce its unsustainable wage bill.
Finance minister Patrick Chinamasa (pictured) made the revelations as he presented his mid-term budget review statement, where he indicated that government’s wage bill was now consuming 96,8% of total revenue.
“The wage bill remains a major component of high expenditures, with employment costs taking 96,8% of the total budget. The wage bill is at the centre of the fiscal deficits and, hence, overall macroeconomic instability,” he said, warning of looming job cuts in the public service.
Government has in the past months been struggling to fund its wage bill, forcing it to stagger salary dates for civil servants and pensioners, sometimes running into the next month.
“The respective adopted expenditure rationalisation measures are meant to reinforce the supply side measures proposed in this Mid-Year Fiscal Policy Review, sustain the wage bill, while creating scope for financing drought, debt service and other capital and operations programmes,” he said.
“I propose a reduction of salaries and allowances by 5 to 20% starting with deputy directors to ministers, effective October 2016.
“Foregoing the 2016 and 2017 bonus, this proposal will translate to savings of around $180 million per annum, which will be channelled to essential expenditures relating to the drought.”
This is the second time Chinamasa has proposed cancelling bonus payments for civil servants.
Last year, he tried it, but his decision was reversed by President Robert Mugabe during the 2015 Independence Day celebrations, where he insinuated that bonuses were a right.
The Finance minister also proposed to tax civil servants’ allowances with effect from next month using a progressive tax structure.
“Taxation of civil servants’ allowances will also bring equity, as similar allowances and benefits earned in the private sector are currently taxed. This is subject to engagement with respective unions,” he said.
In his budget review statement, which the opposition dismissed as a joke, Chinamasa admitted that the government has failed to meet its revenue targets due to depressed economic activity.
Chinamasa also proposed a review of travel arrangements for all the government officials including ministers, parliamentarians, independent commissions and authorities and parastatal bosses.
“I propose reviewing and enforcing compliance with official foreign business travel per diem rates, taking account of global cost of living development,” he said.
Chinamasa said the government should consider cutting its workforce from 298 000 to 273 000 by December 2017, so as to reduce the wage bill to manageable levels of 75% of the total budget.
“The target to reduce employment numbers from the current 298 000 to 273 000 by end of 2017 will yield annual savings of $155 million, which would go towards supporting various development projects and programmes,” he said.
Under the proposed new dispensation, deputy ministers and permanent secretaries would be entitled to only one official vehicle, while directors and equivalent grades will migrate towards a broader vehicle loan scheme instead of condition of service vehicle.
Review of condition of service vehicles will also apply to independent commissions, statutory entities, and State enterprises’ officials.
Chinamasa also proposed to reduce the number of embassies and consulates, in consultation with the Ministry of Foreign Affairs, review benefits for diplomatic staff, including support for educational expenses, rental ceilings and travel support for their families.
Former Finance minister and opposition PDP leader, Tendai Biti yesterday trashed Chinamasa’s budget review statement, describing it as a joke.
“This is a serious admission that they can’t pay salaries. Surely Chinamasa, do the right thing and fall on your sword. In other words, we are living way beyond our means. Fiscal disequilibrium is at the centre of the crisis,” he said.
MDC-T secretary for economic affairs, Tapiwa Mashakada, said by year end, government would have collapsed, as it has no clue how to increase its revenue base.
“This is total disaster, we are headed nowhere and soon it will be a shutdown. The budget deficit is growing and nothing is being done to stop that. Really, this is the end of the regime,” he said.