GOVERNMENT will decentralise the Salary Service Bureau (SSB) by the end of the year as well as develop a medium-term strategy to cut the wage bill and create sufficient room for development spending, among a cocktail of measures to turn around the economy.
This was revealed in a letter of intent, co-authored by Finance minister Patrick Chinamasa and Reserve Bank of Zimbabwe (RBZ) governor John Mangudya, to the International Monetary Fund (IMF) MD, Christine Lagarde dated April 17 2015.
Zimbabwe is implementing a 15-month Staff-Monitored Programme (SMP) with the Bretton Woods institution, but the IMF has ruled out financial assistance until Zimbabwe settles its debt of US$142 million in overdue payments.
An SMP is an informal arrangement between a country’s government and the IMF to monitor the implementation of the government’s economic programmes.
The bloated civil service has been a huge burden on the fiscus with a large number of ghost workers believed to be part of the 236 000 civil servants on government’s payroll.
“On the expenditure side, we have kept the overall wage bill below budget projections in 2014 and intend to lower it as a share of GDP in 2015,” the government officials said.
“The Civil Service Commission has been working on streamlining public sector employment by conducting a restructuring exercise to align ministries’ staffing with their mandates to identify duplication and redundancies. By end-2015 we expect to complete decentralisation and modernisation of the Salary Service Bureau, which would place a payroll assistant in every district, strengthening control over the wage bill and minimising irregularities.”
To this end, cabinet has set up a wage bill committee spearheaded by Chinamasa and Labour minister Prisca Mupfumira to come up with recommendations to cut the astronomical wage bill.
Chinamasa and Mangudya noted that the weak economic environment has constrained revenue collection and as a result have stepped up efforts to raise funds by increasing excise duty on fuel, cigarettes and beer as well as the levy on tobacco growers.
They have increased their debt repayments to the World Bank and the African Development Bank, they said, and they had started to pay the European Investment Bank.
“As our payment capacity improves, we will increase our payments to all IFIs (International Financial Institutions.) Moreover, we have stepped up our reengagement with all creditors, with a view to garnering sufficient support to resolve our debt with bilateral creditors,” Chinamasa and Mangudya said.
Zimbabwe has an external debt of at least US$10 billion.
On measures to restore confidence in the financial sector, they told the IMF that their efforts to address the high levels of non-performing loans (NPLs) have started yielding positive results with NPL levels declining from 20,4% at the end of September 2014 to 15,4% at the end of December 2014, after placing three troubled banks under liquidation.
“We continue our efforts to collect tax arrears and have also started working on strengthening revenue administration, in collaboration with our international partners.”
Chinamasa and Mangudya said they contracted a concessional loan of US$3 million to finance micro, small and medium enterprises and a non-concessional loan of US$50 million for essential equipment to fight wildlife poaching and enhancing tourism activities in the last quarter of last year.
They have guaranteed two loans which were a commercial facility of US$100 million to finance the purchase of equipment for small-scale miners, as well as a US$13 million non-concessional loan for the purchase of coal mining equipment.
They would restructure 10 parastatals as a way to cut costs to government’s revenue base.
Parastatals continue to be a huge burden on the fiscus with the likes of the National Railways of Zimbabwe and national airliner Air Zimbabwe mired in serious financial difficulties that have resulted in poor service delivery and failure to pay employees.
“We have started work on restructuring parastatals to reduce fiscal costs, improve accountability and service delivery. We have identified 10 state-owned enterprises that, after restructuring, will play a more important role in the implementation of ZimAsset,” they wrote.
The parastatals to be restructured include Agricultural and Rural Development Authority, Cold Storage Company, Grain Marketing Board, Air Zimbabwe, Tel One, Civil Aviation Authority of Zimbabwe, National Railways of Zimbabwe, Industrial Development Corporation of Zimbabwe, Zimbabwe National Water Authority and Zimbabwe Power Company.
Chinamasa and Mangudya acknowledged that the Indigenisation and Empowerment Act continues to be perceived as obstacles to foreign investment “purportedly for lack of simplicity”.
To provide clarity and consistency with a view to improving Zimbabwe’s business climate and attracting much-needed capital inflows, government has amended the Act with negotiations, approvals and certification now being executed by line ministries, government said.
“We consider this an important step towards alleviating investor concerns by decentralising responsibilities to the relevant line ministries,” they told the IMF. “Moreover by the third review, we will produce a guide on the Indigenisation and Economic Empowerment Law and publish it on the website of the Zimbabwe Investment Authority.”