HomeEconomyZimbabwe delays military pay over dollar shortage

Zimbabwe delays military pay over dollar shortage

ARMY and airforce personnel in Zimbabwe will be paid two weeks after their usual payday because the cash-strapped finance ministry can’t meet its wage obligation on time.

The southern African nation spends about 83% of the revenue it collects paying government workers, according to Finance Minister Patrick Chinamasa.

A shortage of dollar notes in recent months has worsened Zimbabwe’s economic crisis. The country, which abandoned its own currency in 2009 to end hyperinflation, uses mainly US dollars, though South African rand, euros, British pounds and several other currencies are legal tender.

“Against the background of severe revenue under-performance and the related cash-flow challenges, government has been honouring its monthly wage obligations, albeit through shifting pay dates,” Willard Manungo, Secretary for Finance, said in a circular sent to the military and civil service and obtained by Bloomberg and dated June 16. Treasury confirmed the authenticity of the document.

Government has been postponing paydays for regular civil servants since 2014, though until now it hasn’t been clear if the military has been affected. Some soldiers looted shops in the capital, Harare, in 2008 when their pay was delayed at the height of Zimbabwe’s hyper-inflation crisis, triggered by a failed land reform program that slashed agricultural exports. At that time inflation accelerated to about 500 billion percent, according to the International Monetary Fund. The economy has halved in size since 2000.

Zimbabwe’s military and airforce will be paid on June 27 instead of the 12th of the month while police and prison staff will be paid June 30, Manungo said. Teachers and medical staff will be paid between July 7 and July 14 because government can’t meet the June 20 payday, Manungo said in the circular.

The Zimbabwe Revenue Authority, known as Zimra, said first quarter revenues was US$724.9 million, below a target of US$861,8 million. The southern African nation will introduce so called ‘bond notes’ in October. The currency, pegged to the US dollar, will be printed in Germany and will hold no value outside Zimbabwe.

Cairo-based African Export Import Bank will underwrite as much as US$200 million worth of bond notes.

Cash withdrawals from ATMs have been limited by some banks.-Bloomberg

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