Can zero-deficit budget absorb the pay hikes?
Whether Government will pay the Judiciary staff this month and appease the disgruntled civil servants who demanded a response to their ultimatum issued last Friday within seven days, remains to be seen but one thing is certain, the prevailing economic atmosphere is causing labour relations to overheat.
Workers in the private sector have proposed a 150 percent hike of the minimum wage, a move which, if adopted, will add another burden on companies which are already downsizing, if not outright closing, due to heavy tax burden, frequent power failure as well as forex and fuel scarcity.
Did the Mutharika administration see the day when salary demands by public sector workers would threaten its agenda to use the zero-deficit budget as a tool for wading off donor criticism against bad governance and violation of human rights?
For the greater part of the Mutharika administration the economy was performing well and labour relations were generally stable. I would like to believe that the volatility in labour relations we are now witnessing is more a consequence of the mess that government has made of our economy than anything else.
Some people would like to make us believe that just because any economy goes through cycles, what we are experiencing is a normal economic “turbulence†which will be followed by a period of growth and tranquillity.
I beg to differ. Our plight is more of a consequence of bad politics by a regime absolutely corrupted by the 2.9 million votes President Mutharika amassed in the 2009 presidential polls and a skewed notion of neo-colonialism.
Trouble for us started in earnest when government decided to brook no opposition in an outside Parliament after securing the two thirds majority in the august House. MPs on the Government side ensured the positions of Speaker and chair of all parliamentary committees were taken up by DPP.
They even tried to bend the rules so they could influence the choice of Leader of Opposition. DPP abused its numerical strength in Parliament to pass into law whatever bills, good or bad, the government pushed to Parliament.
Any member of the public who raised eyebrows over what was happening—Malawi Law Society, human rights organisations, the media (specifically Nation Publications Limited), Catholic Bishops, university lecturers and students—was demonised on public radio and TV and, in some cases, punished through other means as well.
Protests from Western donors over increased autocratic tendencies and violation of human rights only made Mutharika believe he is the “economic engineer†with a mission to emancipate Malawi from the bondage of neo-colonialism.
He praised China for giving aid “without strings attachedâ€, attacking Western donors in the same breath, saying they use aid to impose alien cultural values on us including forcing government to legalise gay marriages.
Then came the agenda to ditch the IMF programme and slash aid contribution to the national budget in phases from 30 percent in 2010 to 13 percent by 2014 in the name of zero-deficit budget.
In the 2011/12 budget, government planned to raise an extra K40 billion from the K202 billion domestic revenue. On paper at least that would have enabled government to reduce donor contribution to the budget from 30 percent the previous year to 21 percent.
Unfortunately, reduction of donor aid brought about unprecedented forex shortage which in turn aggravated fuel shortage and crippled the country’s capacity to generate wealth as companies were unable to import raw materials and spare parts, forcing them to scale down operations if not close business outright.
The scarcity of forex, again worsened by government’s deliberate policy to peg it at K167 to a dollar against K300 to the dollar on the parallel market, also helped trigger inflation which has culminated in the current tense labour relations.
All this pose several questions: What levels of domestic revenue will government require to raise through the zero-deficit budget this year to fulfil the agenda of reducing aid share of the national budget from 21 percent to 17 percent while accommodating the ever increasing demand for pay rise in the public sector?
What’s the practicality of realising that colourful dream considering that this year we failed to raise the extra K40 billion leading to mid-term downwards recast of the budget and yet the economy continues to significantly lose its capacity to generate wealth which yields the domestic revenue government banks on?
Peter Mutharika was right, we can’t do without donor aid.
