GOVERNMENT has finally succumbed to pressure to cut recurrent expenditure and an unsustainable wage bill, currently gobbling over 96% of the US$4 billion budget, by adopting a raft of measures, including slashing salaries of cabinet ministers and other employees, closing embassies, cutting foreign trips as well as implementing a massive retrenchment exercise.
By Chris Muronzi
More than 25 000 civil servants are set to be retrenched.
In his mid-term fiscal policy presented in parliament yesterday, Finance minister Patrick Chinamasa also said government would not pay bonuses this year.
Chinamasa, who has been promising reforms for years, said he would cut the wage bill by 20% and lower the salaries and allowances of ministers and senior bureaucrats by between 5% and 20%.
Cabinet, according to him, has already approved the civil service wage bill rationalisation measures, which will result in savings of US$118 million by the end of 2016.
President Robert Mugabe’s government has been under immense pressure from multilateral institutions to reform in order to get critical funding for the revival of the country’s ailing economy.
“The public service wage bill rationalisation measures being implemented by government, effective 1 January 2016, constitute the first installment of measures towards the gradual reduction of fiscal revenues required to support wage expenditures,” he said. “From the measures already approved by government, those instituted with effect from 1 July 2016, will yield additional monthly savings of about US$6,9 million. To this end, cumulative financial savings realised to end of August 2016, amounted to US$64,4 million.”
Government wants to see the budget supporting social and capital spending. Currently, only 4% of the budget is invested in social and capital projects.
The reforms, analysts believe, could be the first step towards unlocking critical funding from multilateral financial institutions.
“Mr Speaker Sir, in view of the above revenue constraints, against expenditure pressures, implementation of the 2016 National Budget inevitably requires further fiscal reforms in order to rebalance expenditures with anticipated revenues, including rationalising public expenditures, as well as the reduction of employment costs in favour of capital and social spending,” Chinamasa said. “In this regard, the medium-term Public Service Wage Policy target is to reduce the consolidated wage bill — wages and salaries for central government plus wage-related transfers to grant-aided institutions — to around 60% of revenue by 2019, thereby creating additional fiscal space to support service delivery and growth-enhancing infrastructural spending.”
The retrenchments will see the current civil service head count of 298 000 reduce to 273 000.
“The target to reduce employment numbers from the current 298 000 to 273 000 by end of 2017 will yield annual savings of US$155 million, which would go towards supporting various development projects and programmes,” he said.
Government also moved to rationalise mobile phone and telephone allowances, standardisation of fuel benefits for members entitled to personal issue vehicles.
Under the new rules, government vehicles will be required to be parked at work stations and police stations after working hours, during weekends and public holidays; and rationalisation of purchase and issuance of newspapers and reading material across all grades.
“However, in order to further buttress the above cost-cutting measures, government has adopted further expenditure rationalisation measures in order to maintain the momentum for reforming the wage bill, targeting it at 50% of total revenues in the medium-term,” Chinamasa said. “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.”
Government will with effect from 1 October 2016 start taxing allowances of civil servants in line with benefits earned in the private sector.
This was subject to engagement with respective unions, he said.
Chinamasa directed grant-aided institutions that are still being funded by the government to contribute towards remuneration of their staff.
Among the cost-cutting measures to be introduced, government will now issue one condition-of-service vehicle to deputy ministers and permanent secretaries, rationalise diplomatic presence worldwide, by reducing the number of embassies and consulates and review the class of travel arrangements for all government officials, including ministers, parliamentarians, independent commissions and authorities and state enterprises’ officials; and reviewing and enforcing compliance with official foreign business travel per diem rates, taking into account global cost of living developments.
These measures, among other things, are seen ushering in a process of austerity.
“(Government is) instituting an enforceable guiding standardised remuneration framework which relates remuneration levels to size, service delivery, revenue performance and profitability of individual state enterprises and parastatals,” he added.