HARARE – The International Monetary Fund has repeated its calls for President Robert Mugabe’s broke government to retrench its workers further in line with reforms aimed at reducing its huge wage bill.
This comes after the executive board of the IMF concluded the Article IV consultation with Zimbabwe this week.
The IMF said Zimbabwe must cut its wage bill from over 90 percent of the budget, but government has not yet shown signs that it will retrench its workers anytime soon.
Cutting wages would allow government to free money to develop its failing infrastructure, including roads and power-generating plants, as well as social services like health and education.
“Budgetary operations were crowding out the private sector, and the expenditure profile tilted towards employment costs and unsustainable agricultural support was inhibiting investments in other priority sectors, particularly infrastructure and social outlays.
“Directors …noted that public sector employment costs remain at an unsustainable level, constraining social and infrastructure spending,” the IMF said.
“Directors encouraged the authorities to engage only in well targeted, cost effective, and properly budgeted support to the agricultural and other productive sectors.
“The ongoing deficit financing modalities, particularly the credit from the central bank, are unsustainable and have significant potential for generating inflationary pressures.
“The marked increase in public debt is crowding out private sector activity, aggravating liquidity shortages, and exacerbating debt distress,” said the IMF.
In April, Finance minister Patrick Chinamasa said government had met all conditions to clear arrears to the World Bank and African Development Bank, paving the way for possible future funding from the IMF.
Chinamasa said in a statement that facilities negotiated by the Reserve Bank of Zimbabwe to repay the $1,75 billion arrears had been “scrutinised and scrutinised” by the World Bank and AfDB, who were satisfied.
“Clearance of debt arrears is expected to open the door to foreign finance inflows and possible debt treatment by the Paris Club and non-Paris Club Bilateral Creditors through an IMF financing programme,” Chinamasa said then.
Zimbabwe has been placed under a Staff Monitored Programme(SMP) a ‘‘friendly’’ programme by the IMF aimed at helping government improve its economic policies.
The SMP is a major step for Zimbabwe in normalising ties with the IMF, which in 2003 suspended Harare’s right to vote its resolutions — a step towards expulsion from IMF membership — over policy differences with Mugabe and non-payment of arrears.