Wage bill rise sustainable—IMF

 

The International Monetary Fund (IMF) has backed the increase in the wage bill, saying it will not change the implementation of the current budget.

IMF resident representative Jack Ree said on Monday that at the current level, the wage bill is sustainable; hence, no need for authorities to be under pressure.

The global lender’s official was speaking in the context of the figures from the Ministry of Finance, Economic Planning and Development which show that the public sector wage bill now stands at K309.6 billion, representing an increase of 14 percent or K36.1 billion from the previous financial year.

However, this is a 0.2 percent decline as a share of gross domestic product (GDP), according to the figures.

Said Ree: “First, the approved wage bill represents about 14 percent increase from last year, so it is still significantly lower than last year’s inflation. Second, the approved amount also marks a decline of the size of the wage bill as a share of GDP.

“In these respects, the increase of the wage bill does not really change the key direction of this year’s budget which is solidifying gains in macroeconomic stability by using prudent fiscal positions as the anchor.”

Ree, however, cautioned authorities to ensure that spending is under control as guided by the budget particularly given forthcoming elections in 2019, which will trigger pressure for spending.

Experts argue that the approved wage bill, though it has registered an increase, is still significantly lower than last year when inflation is factored in; hence, sustainable.

In recent months, government had succumbed to pressure from civil servants for salary hike demands.

Treasury effected a pay hike of around 25 percent after trade unions rejected a wage increment of 10 percent contained in the 2017/18 National Budget.

In a separate interview, Catholic University dean of the Faculty of Social Sciences Gilbert Kachamba cautioned government to be mindful with the unemployment rates and not necessarily the rise in the wage bill.

“This [the wage bill] is sustainable even though there are some small variances which are inevitable. But government, which is a big employer, should be mindful of the unemployment rates and that it can compromise a bit by employing more people and also increasing the wage rate of the civil servants.

“Government should not stick at K300 billion [wage bill] for the sake of sticking to that,” he said.

Expenditures on wages and salaries are the largest budget item and in the 2016/17 fiscal year, they stood at 6.4 percent of GDP, up from 5.7 percent of GDP in 2012/13 financial year, according to the World Bank.

World Bank senior country economists Richard Record is on record as having said that weaknesses in establishment and personnel controls have prevented the authorities from taking a more strategic view of public sector hiring and have made the payroll vulnerable to fraud.

“In addition, the absence of an interface between the payroll and the Ifmis [integrated financial management information system] exposes the system to vulnerabilities.

“Policy reforms should aim at improving the payroll management system and at establishing stronger establishment controls,” he said. n

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