Civil servants and Government pensioners have been given an immediate 50 percent pay rise along with, for the next three months, flat non-taxable US dollar-denominated Covid-19 allowances of US$75 a month for each civil servant, regardless of grade, and US$30 a month for Government pensioners.
In a statement last night announcing the interim pay rises and allowances, the Ministry of Finance and Economic Development said the US dollar allowances would be paid into US dollar-denominated nostro bank accounts, which all civil servants and Government pensioners had to open.
The statement said the Reserve Bank of Zimbabwe (RBZ) was urgently addressing the domestic payments infrastructure, so that those with these nostro accounts could use the money for transactions.
The RBZ has already announced that the freezing of the interbank exchange rate ends next week with weekly auctions from Tuesday setting the ruling official rate from then onwards.
The net effect of all these moves will mean that civil servants should get a degree of buffering from the effects of the present hyperinflation largely driven by black-market exchange rates.
Stressing that the pay rise and allowances were an interim measure, the statement said they were put in place urgently to help civil servants and Government pensioners cope with “transitory economic challenges being currently experienced in the country, which have been exacerbated by the Covid-19 pandemic”.
The interim adjustments had been put in place while a comprehensive impact assessment was being done along with the working out of the necessary framework for mitigating against macroeconomic risks of wage proposals already made to the Government.
The risks are to the budget, where the Government cannot spend money it does not receive, and to the economy in general if the Government returns to deficit budgeting for day-to-day expenses.
“Government reiterates its commitment to payment of a living wage to its employees, while ensuring sustainability of the budget. Government is also widening the remuneration framework for civil servants to introduce significant non-monetary benefits and these will be announced in due course,” said the statement.
The flat Covid-19 allowances are the same for a general hand sweeping floors and for a permanent secretary with all grades in between.
This will give those at the base of the pay pyramid far greater benefits in proportion to their total pay package and tend to flatten the pay differentials between grades.
After announcing the outlines of the interim awards in Parliament, Finance and Economic Development Minister Mthuli Ncube implored business not to reject coins and those notes inscribed “bond notes” saying they were still legal tender.
Several legislators had complained that traders were rejecting small denominations as well as $2 and $5 notes that were inscribed “bond notes”.
“We want to make it clear that $2 notes are still legal tender. Perhaps we need to issue a press statement to that effect. But we will be substituting those bond notes with new notes but it is a gradual process,” said Minister Ncube.
Workers’ representatives who were contacted to comment on the sudden interim increase said they had not been consulted before the announcement, something that the statement seemed to address when it said the immediate steps were an interim measure while the effects and requirements of longer-term proposals were being worked out.
Zimbabwe Nurses Association president Mr Enock Dongo said he would only comment after they had received the communication from the Government.
Apex Council secretary general Mr David Dzatsunga said he would have expected Government to engage them to agree on a new scale premised on inflationary pressures that have been on-going.
Zimbabwe Rural Teachers Association president Martin Chaburumunda said Government should have consulted them before making that decision.