Thursday, 16 June 2016


THE cash-strapped government is facing increasing fiscal pressures on the back of a rapid decline in tax revenues amid tell-tale signs that it could struggle in the coming months to pay salaries for nearly 350 000 civil servants on its payroll, the Financial Gazette can report.

Conservative estimates suggest that the cash crisis rattling markets has worsened the country’s economic health, with consumer spending dipping by as much as 40 percent in the past month.

The net effect of this has been a huge decline in sales volumes across sectors, squeezing tax thresholds remitted to the taxman.

Indications are that further job losses are inevitable as employers are likely to react in the coming months by either slashing salaries or offloading workers onto the streets, which are already teeming with job seekers.

With red lights flashing on government, Treasury has immediately responded by spreading salary payments throughout the month to manage cash flows.

The public sector wage bill currently accounts for over 80 percent of government expenditure, meaning that a paltry amount remains for crucial infrastructure development projects, critical in turning around the economy.

To manage the fiscal pressures, government has resolved to pay civil servants almost every week and in order of priority. As usual, the uniformed forces will be the first in the queue, followed by health workers.

Ever since the pay dates became more of a moving target, the entire civil service has been gripped by uncertainty.

Talk of an impending rationalisation of the public service in line with recommendations from the International Monetary Fund has also seen morale among government workers plumbing fresh depths.

While Labour and Social Welfare Minister, Prisca Mupfumira, and her finance counterpart, Patrick Chinamasa, could not be immediately reached for comment, the Reserve Bank of Zimbabwe (RBZ), which resumed its function as the bank of government in 2014, confirmed the development.

Until 2014, CBZ Bank — the country’s largest retail bank by assets — had been acting as the State’s bankers from 2009 because of the central bank’s poor capitalisation at the time.
John Mangudya, the RBZ governor, confirmed this week that the pay dates have indeed been reviewed once again to manage the liquidity situation.

He said: “Queues that you see (at the banks) – it’s not a run on deposits but government has now spread pay dates meaning almost every week some government (workers) will be paid.”

As government continues to grapple with the symptoms of the crisis, Chinamasa has instructed the Zimbabwe Revenue Authority to come up with measures to start collecting tax from the informal sector in order to alleviate the cash crisis.

The Finance Minister admitted last week that the formal sector was now dead, resulting in revenue challenges for Treasury in the face of investor fatigue, lack of balance of payments support and poor inflows from aid agencies. financial gazette


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