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Harare - The Zimbabwean government on Tuesday reversed the wage and job cuts plan included by Finance Minister Patrick Chinamasa in his mid-term fiscal policy review statement, saying the move was never approved by cabinet.
According to a statement released by Information, Media and Broadcasting Services Minister Christopher Mushohwe, the proposal to cut jobs was rejected by cabinet.
“The position of cabinet is that the minister of finance and economic development did not take into account the decision by cabinet to reject the proposal.
“Once again, at the last cabinet of 12th September, 2016 the proposals were rejected,” said Mushohwe, adding that “the president and cabinet want to assure the civil servants, the farmers and the public at large that these proposed measures are not operative”.
In his mid-term fiscal review statement, Chinamasa proposed cutting spending in the civil service sector, including reducing the government workforce by 25 000. The move was expected to yield annual savings of $155m.
READ: Zim public workers reject govt job cuts plan
Chinamasa had also proposed non-payment of annual bonuses, which was expected to yield savings of $180m per annum. The plan included reducing salaries and allowances by 5% to 20%, starting with deputy directors to ministers effective from October 2016.
It also included taxing civil servants' allowances with effect from October 1 2016, using a progressive tax structure. With respect to farmers, the plan included import parity pricing for maize for the 2016/17 season.
Mushohwe however said after “extensive deliberations, cost cutting measures relating to the civil service were rejected. It is hoped that this clarification puts to rest anxieties that may have been raised within the civil service, the farming community and the public at large.”
Analysts however said as much as the reversal is retrogressive, it also showed deep divisions and mistrust within government.
“This is not the first time that Minister Chinamasa has had a budget decision reversed. In his 2016 national budget he announced that government was not going to pay annual bonuses, only for the decision to be reversed in a public address by President Robert Mugabe," said one analyst.
“So one wonders why he continues to make decisions that are outside agreements made in cabinet, risking his credibility and that of the whole government."
Golden opportunity missed
Another analyst, Walter Mandeya, said failure to implement the job cuts plan was akin to missing a golden opportunity to correct an unsustainable situation. Government’s employment costs constitute about 96.8% of total revenue collections, leaving no room for capital and developmental expenditure.
Chinamasa has already said that government cannot continue to finance its budget deficit through issuance of treasury bills, as this poses some financial risks on domestic debt instrument holders and domestic financial institutions.
"This situation, unfortunately, is not tenable and is undermining the stability of the financial sector and overall economy," he said in his budget statement.
Further to this, government borrowing is also crowding out lending to the private sector, stifling new domestic investment and growth.
"This is creating a vicious cycle, whereby excessive government borrowing leads to poor performance of the private sector and, in turn, diminished future tax revenues," he said.
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