Political pressure to continue raising wage for the public sector workers, particularly the security sector will likely undercut government efforts to pare back spending in the Transitional Stabilisation Programme (TSP) which is meant to improve Zimbabwe’s fiscal accounts and boost growth, an analyst on Zimbabwe’s political economy says.
Key measures of the TSP, introduced by Zimbabwe’s Finance Minister, Professor Mthuli Ncube last year include revenue-raising measures such as tightening tax administration and compliance as well as widening the tax base.
Other key measures of the programme also include expenditure-lowering objectives such as keeping the public sector wage bill under control, and more sustainable deficit financing through re-engaging with international financial institutions.
Fitch Solutions Group Limited in its recent financial analysis report says although Finance Minister Ncube pledged fiscal discipline after announcing the issuance of a new currency, the government will struggle to significantly pare back spending in the face of elevated popular unrest and weakening economic growth.
“Further significant spikes in inflationary pressures pose the risk of stoking even greater social unrest, particularly in the wake of widespread protests in January 2019 which ensued as a result of a nearly 150% increase in fuel prices,” the report says.
“As such, we believe President Mnangagwa sees it as essential to maintain the support of the national security forces, even at the expense of higher spending.”
Price increases have resulted in workers demanding higher wages from the government to meet the rising cost of living in Zimbabwe.
Costs of goods and services have been going up with Zimbabwe’s RTGS Dollar losing value to the US Dollar.
“While we deem it somewhat unlikely that the government will comply with soldiers’ demands to be paid in US dollars following the introduction of a transitional currency (the RTGS dollar), we do see the risk of further pay rises for public sector workers in the quarters ahead in order to prevent strikes and unrest,” the analysis goes on.
Government teachers are already planning an industrial action in June towards their salaries, which they claim to have been eroded by inflation.
Zimbabwe’s military and the police have been instrumental in helping to contain protests, which happened this year after reduced access to the supply of basic consumer goods and rising prices.
The country’s military has also been a vital player in the ascension of President Emmerson Mnangagwa into power.