Zimbabwe Targets Government Wage Bill to Rein in State Spending

(Bloomberg) -- Zimbabwean Finance Minister Mthuli Ncube cut civil servants’ pay and announced a series of other steps to reduce the government’s bloated wage bill.

Ncube, a University of Cambridge-trained economist appointed in September, presented his first budget on Thursday as he seeks to repair an economy hobbled by decades of mismanagement under former President Robert Mugabe. The International Monetary Fund estimates the state’s wage bill consumes more than 90 percent of government revenue.

Zimbabwe Targets Government Wage Bill to Rein in State Spending

“Against a background of a structural imbalance in the composition of budget expenditure, wherein the wage bill accounts for a disproportionate share, re-balancing of expenditures is critical,” Ncube said. He announced the following measures to contain spending:

  • Cut senior civil servants’ remuneration by 5%
  • Calculate annual bonus using only basic pay, instead of including housing and transport allowances
  • Close eight of its foreign-service missions
  • Terminate the employment of thousands of so-called youth officers

The steps will help the government contain expenditure in 2019, which is forecast at $8.16 billion, unchanged from this year, Ncube said. Revenue is forecast to grow 25 percent to a projected $6 billion, reducing the deficit by more than half to 5 percent of gross domestic product, from 11.7 percent, he said.

$ billion2017 (Est.)2018201920202021
Total revenue3.875.306.607.498.56
Total spending6.398.168.168.989.82
Budget deficit (%)11.711.754.12.9
Total financing2.416.126.472.682.02
Inflation (% at end period)-3.425.955.55.8

Ncube also cut the Treasury’s growth forecast for this year, citing a foreign-exchange shortage that’s curbed mining and manufacturing output.

Growth this year is expected to be 4 percent, compared with a forecast of 6.3 percent he announced last month.

“During the last half of the year, there was a noticeable growth slowdown associated with foreign-currency supply and allocation challenges, exchange-rate misalignment, inflationary pressures and rebasing effect,” Ncube said. “The most affected sectors include mining, manufacturing and services.”

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