'Civil servants wage bill Mthuli's headache'

FINANCE minister Mthuli Ncube will tomorrow deliver his mid-term fiscal policy review statement amid growing budgetary demands at a time when the country's tax base is shrinking, and the economy severely affected by the COVID-19 pandemic.

Since government announced the first COVID-19 lockdown in March 2020, the economy has been partially opened up and some restrictions eased, while others have been tightened to curb the further spread of the pandemic.

The measures have restricted business to operate for as little as six hours daily, while the country's borders have been closed, which has affected importation of raw materials.

Industry has also been affected by low disposable incomes for employees, which translates to low aggregate demand by consumers amid rising operating costs.

To curb the spread of the pandemic, industry needs to procure personal protective equipment for its employees, sanitisers and temperature check equipment, a situation which has adversely affected balance sheets of companies.

Economists yesterday told NewsDay that recurrent expenditure such as increases in civil servants' wages would demand a bigger vote for employment costs, which would be Ncube's biggest headache.

Economic analyst Batanai Matsika said Ncube should speak to the issue of provision of social safety nets for the vulnerable, and stimulus packages for industry to save it from collapse.

He said Ncube should explain the US$1 billion special drawing rights (SDR), and how they would impact the economy.

"In the wake of COVID-19, we need to know how government is going to deal with the issue of social safety nets. As you know, the lockdown periods have come back again and again, and we need to know what is going to happen in terms of social safety nets, especially for the informal players and small-to-medium enterprises," Matsika said.

"Secondly, there has been a lot of news around the US$1 billion SDR allocation, and so a breakdown and insights into how that money will be allocated would be imperative. Ncube needs to explain the impact of COVID-19 on government revenues, and also on monetary policy developments."

Economist John Robertson said the fiscal policy review should be an opportunity for Ncube to announce measures to collect taxes from those that are not paying in order to ensure that taxes for those that are paying are lowered.

"We have very few people being taxed. Out of a population of 15 million, we have about 500 000 being taxed and they are taxed too high. We should open up the economy and have more people to tax and we tax them less," he said.

Robertson said pay-as-you-earn for the last quarter was high and it affected workers' incomes as they were overtaxed.

"Ncube must have a re-look at the income tax brackets," he said, adding that licence fees for informal traders should also be reduced in order to encourage them to formalise.

Robertson said it was cheaper in neighbouring countries like Zambia to set up new businesses than in Zimbabwe.

"There will be pressure to increase wages for the civil service if inflation remains a problem in the second half of the year. Already, Zimbabwe's civil service head count is too high," he said.