The International Monetary Fund says Zimbabwe does not have the capacity to increase the salaries of state workers as President Robert Mugabe has promised, warning that a rise in compensation could seriously damage the country's economic prospects.
An IMF team that just completed a week-long mid-year budget review issued a statement saying public sector pay can only be increased in 2012 after a wider consultative process including business, government and civil servants.
Mission head Vitaliy Kramarenko said salary increases are not affordable and could lead to arrears in wages, destabilization of manufacturing, the banking system and external accounts, and jeopardize the country’s recent gains in growth and living standards.
He said Harare should focus on establishing a stable, low-inflation environment allowing for the timely payment of salaries at current levels.
The IMF projected that the economy will expand by 7.5 to 8 percent this year, upgrading an earlier projection of just 5.5 percent growth in gross domestic product.
“The slight upwards revision to growth, compared with projections at the time of Article IV staff report, reflects the faster-than-expected growth in agriculture, particularly tobacco and maize,” said Kramarenko. He said the country should plug a projected financing gap of US$445 million while setting aside funds for social programs and infrastructure.
Bulawayo economist Eric Bloch said the IMF’s fears are warranted as the economy is still quite fragile. “I believe that Zimbabwe can do much better if it gets rid of 75,000 ghost workers [on state payrolls], cuts overseas spending on unnecessary diplomatic missions and reduces the number of armed forces,” Bloch said.
But Zimbabwe Teachers Association Chief Executive Sifiso Ndlovu said the IMF should stop prescribing what he called dangerous policies for the country, citing a "disastrous" structural adjustment in the 1990s which "destroyed the nation’s economic base."
Progressive Teachers Union of Zimbabwe President Takavafira Zhou said Harare should tap proceeds from the Marange diamond field to fund pay increases.
Some teachers represented by the Progressive Teachers Union are on strike demanding higher salaries, though the labor action has not been successful in either urban or rural areas as most teachers fear losing incentive supplements paid by some schools.
