Business / Economy
RBZ boss wants salary reforms
14 Aug 2016 at 13:10hrs | Views
Government should rationalise its wage bill and increase revenue inflows if cash circulation is to improve in the immediate term, Reserve Bank of Zimbabwe Governor Dr John Mangudya has said.
The Sunday Mail last week engaged the central bank chief on the continued United States dollar cash shortages. Though the market has caught onto plastic money and bank transfers as alternatives to cash - with such transactions jumping from US$4,8 billion to US$5,5 billion between May and July 2016 - people still require money in their pockets for miscellaneous transactions.
As such, long queues at banking institutions remain commonplace, and the situation appeared to worsen over the past two weeks with many workers battling to access their salaries.
Financial institutions have cut daily withdrawal limits from US$200 to US$100, bringing money transfer agents back into business as people with relatives and friends outside the country increasingly source money through them to beat the liquidity crunch.
Monthly, the civil service gobbles roughly 85 percent of revenue, and Dr Mangudya says rationalising that could improve cash circulation. He said at least US$400 million could be saved annually through this intervention.
"We need to have fiscal consolidation as an immediate or short-term consolidation solution to the cash shortages that have persisted over the months. When we are talking about fiscal consolidation, it is a process when our fiscal health can be improved and indicated by reduced fiscal deficit which is manageable and bearable for the economy.
"Improved tax revenue realisation from all the necessary departments and better aligned expenditure are thus components of fiscal consolidation. We need to cut our expenditure to around 40 percent from the current 85 percent so that there will be room to reduce our total capital expenditure.
"The country can't continue to pay ghost workers, some of whom are now based in South Africa, Australia, United Kingdom and other countries." Dr Mangudya said the United States dollar cash shortages were a symptom of narrow fiscal space and a trade deficit.
He said the RBZ was pursuing a number of mitigation strategies such as promoting plastic money use and spurring the development of a cashless society. "On the long-term solutions, we need to produce, increase our fiscal space and increase our exports, thereby improving the ease of doing business, creating a good investment climate and improving our policies to ensure more investors come in.
"One thing people should bear in mind is that even when we take our proceeds from exports outside the country, we are not allowed by the Anti-Money Laundering laws to carry physical money in our safes, but most of the transactions are done through electronic transfers.
"The Reserve Bank has consistently advocated increased usage of plastic money in line with developments across the region and globe.
The central bank's efforts have culminated in acceptance of electronic means of payments in most supermarkets, wholesalers and
etail shops and at service stations.
Various Government and quasi-Government departments have also accepted this."
On the multi-currency system, Dr Mangudya said: "We encourage the public to embrace all currencies included in the multi-currency basket. The problem is that many people seem addicted to the United States dollar, hence the cash shortages. Had we been using all the currencies in that basket, the problems would have been fewer."
Zimbabwe has been experiencing US dollar cash shortages since April 2016, a situation authorities attribute to over dependence on imports, externalisation, narrow fiscal space and rejection of the full multi-currency basket adopted in 2009.
Other countries in Southern Africa have been targeting Zimbabwe as a source of US dollars at reasonable rates, selling goods to the country and repatriating their profits.
Government has imported over US$360 million since the shortages began, and is also working towards rationalising its wage bill in keeping with the IMF Staff Monitored Programme.
A 2015 civil service audit established that Government had 188 070 workers, excluding the uniformed forces and personnel under the Health Services Board. Some 130 000 are in education, though the approved staff threshold for this sector is 100 000.
In the first half of 2015, Treasury spent US$1,54 billion on labour against revenue of US$1,718 billion. Monthly, US$120 million is spent on salaries, with the least-paid taking home about US$380.
Chief labour cost drivers are abuse of overtime allowances and leave days, salary fraud, idle manpower, role duplication and unco-ordinated staff recruitment, according to the audit report.
The Sunday Mail last week engaged the central bank chief on the continued United States dollar cash shortages. Though the market has caught onto plastic money and bank transfers as alternatives to cash - with such transactions jumping from US$4,8 billion to US$5,5 billion between May and July 2016 - people still require money in their pockets for miscellaneous transactions.
As such, long queues at banking institutions remain commonplace, and the situation appeared to worsen over the past two weeks with many workers battling to access their salaries.
Financial institutions have cut daily withdrawal limits from US$200 to US$100, bringing money transfer agents back into business as people with relatives and friends outside the country increasingly source money through them to beat the liquidity crunch.
Monthly, the civil service gobbles roughly 85 percent of revenue, and Dr Mangudya says rationalising that could improve cash circulation. He said at least US$400 million could be saved annually through this intervention.
"We need to have fiscal consolidation as an immediate or short-term consolidation solution to the cash shortages that have persisted over the months. When we are talking about fiscal consolidation, it is a process when our fiscal health can be improved and indicated by reduced fiscal deficit which is manageable and bearable for the economy.
"Improved tax revenue realisation from all the necessary departments and better aligned expenditure are thus components of fiscal consolidation. We need to cut our expenditure to around 40 percent from the current 85 percent so that there will be room to reduce our total capital expenditure.
"The country can't continue to pay ghost workers, some of whom are now based in South Africa, Australia, United Kingdom and other countries." Dr Mangudya said the United States dollar cash shortages were a symptom of narrow fiscal space and a trade deficit.
He said the RBZ was pursuing a number of mitigation strategies such as promoting plastic money use and spurring the development of a cashless society. "On the long-term solutions, we need to produce, increase our fiscal space and increase our exports, thereby improving the ease of doing business, creating a good investment climate and improving our policies to ensure more investors come in.
"One thing people should bear in mind is that even when we take our proceeds from exports outside the country, we are not allowed by the Anti-Money Laundering laws to carry physical money in our safes, but most of the transactions are done through electronic transfers.
The central bank's efforts have culminated in acceptance of electronic means of payments in most supermarkets, wholesalers and
etail shops and at service stations.
Various Government and quasi-Government departments have also accepted this."
On the multi-currency system, Dr Mangudya said: "We encourage the public to embrace all currencies included in the multi-currency basket. The problem is that many people seem addicted to the United States dollar, hence the cash shortages. Had we been using all the currencies in that basket, the problems would have been fewer."
Zimbabwe has been experiencing US dollar cash shortages since April 2016, a situation authorities attribute to over dependence on imports, externalisation, narrow fiscal space and rejection of the full multi-currency basket adopted in 2009.
Other countries in Southern Africa have been targeting Zimbabwe as a source of US dollars at reasonable rates, selling goods to the country and repatriating their profits.
Government has imported over US$360 million since the shortages began, and is also working towards rationalising its wage bill in keeping with the IMF Staff Monitored Programme.
A 2015 civil service audit established that Government had 188 070 workers, excluding the uniformed forces and personnel under the Health Services Board. Some 130 000 are in education, though the approved staff threshold for this sector is 100 000.
In the first half of 2015, Treasury spent US$1,54 billion on labour against revenue of US$1,718 billion. Monthly, US$120 million is spent on salaries, with the least-paid taking home about US$380.
Chief labour cost drivers are abuse of overtime allowances and leave days, salary fraud, idle manpower, role duplication and unco-ordinated staff recruitment, according to the audit report.
Source - sundamail
