'Banks refuse to make salary payments on behalf of Zimbabwe govt'

A dramatic financial crisis has hit Zimbabwe's civil service as banks have reportedly withheld payments for thousands of public sector workers' salaries, citing the government's inability to meet its financial obligations. Former Finance Minister Tendai Biti has claimed that some banks "refused" to make payments in November, leading to delays in the disbursement of the ZiG component of wages, a crucial element of civil servant compensation.

Biti, in an interview with ZimLive, said that government revenues have plummeted to "unsustainable" levels, leaving the administration with no capacity to pay workers on time. According to Biti, the government's financial situation began to deteriorate significantly after April 5, when the government introduced the controversial ZiG (Zimbabwean Dollar component) for wages.

"Revenues seriously dipped after April 5 when they introduced the ZiG. Big companies reorganised. Some retrenched, some relocated and many middle-sized companies simply shut shop," Biti explained.

The government's revenue collection, he said, has drastically missed its targets. Up to September, only US$2.5 billion was collected against a budget target of US$9 billion. Historically, Zimbabwe has managed to collect at least US$4 billion annually over the past decade, but Biti suggested that the government would be lucky to reach US$3 billion by the end of the year.

The delayed payments in November affected thousands of civil servants who were not paid the ZiG component of their salaries, which also included a bonus payment. The government has not provided any clear explanation for the delay, although unions have threatened strikes in response to the growing dissatisfaction among workers.

Two banks were specifically affected by the delays: POSB (Post Office Savings Bank) and AFC Holdings (formerly Agribank). Sources close to the situation confirmed that payments were eventually made on November 29 for POSB customers and December 2 for those banking with AFC.

Biti explained that in the past few months, banks had been advancing the government's wages, waiting to be reimbursed later. However, in November, the banks reportedly refused to process the payments, citing the government's failure to settle outstanding debts, particularly the Non-Negotiable Certificates of Deposit (NNCDs) owed to them.

"In the past few months banks have actually been paying salaries for the government and then subsequently waiting for a reimbursement. In November, they refused to do this. They are miffed by the government's failure to honour what they are owed," Biti explained.

Biti further criticized the government's economic management, claiming it had been living beyond its means. He pointed to unbudgeted expenditures, such as those related to the SADC summit in July, which he claimed cost millions of dollars at a time when government revenues were already on the decline.

He also blamed Finance Minister Mthuli Ncube for policies that have de-industrialized the country and worsened the financial crisis, pointing to poor management of exchange controls and skewed revenue measures. As a result, Biti said, many major companies have left Zimbabwe since 2018, and the government has been forced to target the informal sector with indirect taxes, which he described as regressive and harmful to ordinary citizens.

"Mthuli Ncube's policies, particularly exchange control mismanagement and skewed revenue measures, have de-industrialised the country and increased informalisation," Biti argued. "Big players have left this economy since 2018 thanks to this finance minister and his government."

Biti's comments came at a time of heightened disaffection towards President Emmerson Mnangagwa's administration, with public sentiment turning sour due to the ongoing economic struggles. Biti emphasized that the only way to resolve Zimbabwe's current financial crisis was through tax cuts, encouraging investment, liberalizing or even scrapping the ZiG, and a significant reduction in government expenditure.

"Instead, they are digging their heels and accelerating the same issues that have brought chaos. When we say this is the worst government in the history of governments, this is not an unfair jibe, it's empirical," Biti concluded.

The economic outlook for Zimbabwe remains uncertain as civil servants continue to face delays in their pay, and public sector unions threaten industrial action unless the government addresses the deepening financial crisis.