Zimbabwe Needs Bold Reforms to Boost Growth

The International Monetary Fund says Zimbabwe should undertake bold reforms that include streamlining of the public sector wages to ensure the viability of the economy.

At a press briefing last week, William Murray, deputy spokesperson in the communications department, said a “comprehensive economic transformation plan will be important to ensure the viability of the dollarized Zimbabwean economy”, Yahoo reported.

“The authorities need to take action to streamline public sector wages urgently. They also are encouraged to accelerate public enterprise reform, improve public financial management, develop key infrastructure and to strengthen the rule of law and to improve governance,” he said.

Zimbabwe has been reluctant to undertake reforms on public sector wages, which continue to gobble a huge chunk of the budget. This has crowded out allocations to social sectors and infrastructure development.

In the period January to October 2016, employment costs gobbled 91% of total revenue. For 2017, Finance Minister Patrick Chinamasa projected employment costs of $3 billion, out of the $4.1 billion budget. This means that employment costs are projected to constitute 73% of the national budget.

Analysts say divisions in the ruling Zanu PF party has spilled into government, where Chinamasa has been under threat from hawks in the party against his liberal policies.

Last year, the government shot down Chinamasa’s proposal to forgo bonuses and cut salaries. The government is struggling to pay 2016 bonuses and last week the civil servants rejected the proposed stands-or-bonus scheme.

Zimbabwe has been mending its relations with international financial institutions to unlock fresh lines of credit required to reboot the economy. 

The country also cleared its overdue obligations to the IMF. This resulted in the removal of remedial measures by the fund.

At the time, the IMF said removal of remedial measured was not an automatic ticket to getting financing, as the country has to resolve its arrears to multilateral creditors, including the African Development Bank, the World Bank, and other multilateral institutions, bilateral official creditors and external private creditors (if any).

It said Zimbabwe has to implement strong fiscal adjustment and structural reforms to restore fiscal and debt sustainability and foster private sector development.