Happiness Zengeni Business Editor
AS part of bold measures to reverse an unsustainable consumptive position, Government has embarked on a civil service restructuring exercise which includes a reduction in employment numbers by 25 000, a cut on salaries and allowances and foregoing of bonuses for two years.
Government will also rationalise the number of embassies and consulates, review class travel arrangements of all officials including ministers, parliamentarians, independent commissions and authorities andState enterprises’ officials and a reduction in foreign allowances.
The measures are expected to reduce employment costs to around 60 percent of total revenues by 2019 from the current 97 percent and ultimately redirect revenue towards capital expenditure which will stimulate production.
Presenting the Mid-Year Fiscal Policy Review Statement in the National Assembly yesterday, Finance and Economic Development Minister Patrick Chinamasa said fiscal space remains tight as revenues consistently underperform while expenditures continue to outstrip targets.
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Employment costs swallowed $1,638 billion of revenue between January and June this year which constituted 96,8 percent of total revenues.
“Against expenditure pressures, implementation of the 2016 National Budget inevitably requires further fiscal reforms in order to rebalance expenditures with anticipated revenues, including rationalising public expenditures, as well as the reduction of employment costs in favour of capital and social spending,” Minister Chinamasa said.
To achieve this, Government would continue with rationalisation and realignment measures already approved by Cabinet which will reduce the baseline public employment costs by around $118 million by end of 2016.
Already some of the key Wage Bill Rationalisation Measures have since been implemented, and are already yielding monthly savings of around $6,5 million, effective January 1 2016.
“The Public Service Wage Bill rationalisation measures being implemented by Government, effective 1 January 2016, constitute the first instalment of measures towards the gradual reduction of fiscal revenues required to support wage expenditures.
“From the measures already approved by Government, those instituted with effect from 1 July 2016, will yield additional monthly savings of about $6,9 million. To this end, cumulative financial savings realised to end of August 2016 amounted to $64,4 million. This will culminate in overall monthly savings of $13,4 million against targeted monthly savings of $14,7 million, translating into projected annual savings of around US$118 million.’’
However, to reinforce the measures while creating scope for financing drought, debt service and other capital and operations programmes Government would reduce salaries and allowances by 5 and 20 percent starting with deputy directors to ministers effective October 2016.
There will also be no bonus payments for 2016 and 2017. “The proposals will translate to savings of around $180 million per annum, which will be channelled to essential expenditures relating to the drought,” said Minister Chinamasa.
Government will also with effect from October 1, 2016 tax civil servants’ allowances using a progressive tax structure subject to engagement with the respective units.
Further to that grant-aided institutions which are still being funded by Government were directed to contribute towards the remuneration of their staff.
On condition of service vehicles, Minister Chinamasa said Government would issue one condition of service vehicle to deputy ministers, permanent secretaries and those of equivalent grades. Directors and equivalent grades will migrate towards a broader vehicle loan scheme in replacement of condition of service vehicle. “Review of condition of service vehicles will also apply to independent commissions and authorities, statutory entities, and State enterprises’ officials.”
The minister also announced the suspension of all Government bailouts of parastatals that are not supported by approved specific and measurable recovery plans that comply fully with the Remuneration Framework and Public Corporate Governance Law.
Other measures include the rationalisation of the foreign service missions by reducing the number of embassies and consulates in consultation with the Ministry of Foreign Affairs, reviewing benefits for diplomatic staff, including support for educational expenses, rental ceilings and travel support for children of diplomats.
The new measures will also see the rationalisation of foreign travel through a review of the class of travel arrangements for all Government officials including ministers, parliamentarians, independent commissions and authorities and State enterprises’ officials; and enforcing compliance with official foreign business travel per diem rates, taking account of global cost of living developments since then.
“Where special rates are extended, the respective beneficiaries will be required to account and acquit,” he said.
However, he noted that the measures will only result in the ratio of employment costs to revenue going down to 76 percent which will still leave no room for development expenditure as well as critical debt repayments.
“There would, therefore, be need, in the outlook, for further reduction in employment costs and I propose that, in addition to the above measures, we consider additional reforms to reduce the monthly wage bill as a continuation of the Zim-Asset reform agenda to fully support economic stimulation.
“In this regard, under the forthcoming 2017 National Budget, I will be proposing measures that target employment costs of $232 million per month by June 2017 and $219 million by December 2017.”
Minister Chinamasa said together with the Minister for Public Service, Labour and Social Welfare and the service commissions, the Government would downsize the civil service from the current level of 298 000 to 273 000.
“It is important for the Ministry of Public Service and Social Welfare as well as the service commissions to initiate the rationalisation process to enable me to reflect this in the 2017 Budget.”
He said the target to reduce employment numbers from the current 298 000 to 273 000 by end of 2017 will yield annual savings of $155 million, which would go towards supporting various development projects and programmes.
According to Minister Chinamasa, initially the 2016 National Budget was proposed at $4 billion for 2016, premised on anticipated revenues of $3,85 billion, and a projected domestic financing gap of $150 million and of the total Budget, recurrent expenditures were estimated at $3,685 billion, while $315 million was approved for development programmes.
In the outlook, revenue is projected at under $3.7 billion by year end. This represents a decline from the initial projection of $3,85 billion. Total expenditures during the six months to June 2016 were $2,316 billion, against a target of$2,007 billion, giving over-expenditures of $308.4 million. Total revenue was $1,69 billion but Chinamasa said though subdued by the declining momentum in economic activity this year, reflected positive gains during the second quarter of 2016.