On Wednesday, the 17th of June, the Ministry of Finance and Economic Development announced that both civil servant salaries and government pension payouts will be increased by 50%. In addition to the increments, they will also receive “COVID-19” allowances in United States dollars. For the next three months, June inclusive, each civil servant, regardless of rank, will receive 75 USD per month while their counterparts on pension will receive 30 USD. The statement by the ministry further advises all civil servants and pensioners to immediately open USD denominated Nostro bank accounts to receive these allowances.
Other civil servants can thank their health counterparts
The announcement comes in the wake of protests by doctors and nurses in Harare the same day. The health workers were protesting the slashing of their already meagre salaries at a time when the local currency is being gobbled up by inflation. The government had claimed that rather than being salary cuts, these reductions were the result of some unspecified arrears being paid off. Announcement of the salary increments and allowances came at the same time as some government officials and state media outlets like ZBC were dismissing the protesting nurses and doctors as isolated political malcontents.
While the government will never admit this, the provisions are obviously in direct response to the aforementioned protests by the health workers, who unlike their other counterparts in the civil service can move around with considerably more freedom during the current lockdown. The enforcement of the lockdown has been particularly erratic and inconsistent in recent days with even the formally employed being turned away in confusion from the central business district in places like Bulawayo.
The provisions appear to have been the result of some hasty decision making on the part of the government as they did not at first appear to fully consider and address some of the problems that may come with the country’s largest employer suddenly dishing out USD paycheques via the banking system. In the original statement, the Ministry acknowledged that this may indeed trigger some market shocks. However, the problems I am talking about here are the logistical challenges that come with the multitudes of civil servants and pensioners having to not only queue to register for these Nostro bank accounts but to also provide the details to the government. The problem is made worse by the fact that a large number of pensioners live in remote areas, outside the towns where they usually collect their payouts (or used to when there was enough cash).
Another big doubt that was lurking in everyone’s minds was whether these allowances could be physically collected as United States dollars. Well, nurses and doctors are reported to be able to withdraw theirs so this left some with hope. On the other hand, in the statement, there was some worrying language where a reference was made to the desire to prevent a “negative shock in the market” and a framework for “mitigating against the downside macroeconomic risks of the wage proposals on the budget and the economy”. Forgive my paranoia but such vague language has been used in the past to describe or explain away questionable decisions that have had negative consequences on the economy and the local currency.
Withdrawals will be impossible
It was highly unlikely that the RBZ, which over the past two months has adopted a scorched earth policy against the black market, would let foreign currency from the government’s coffers trickle back into the hands of its sworn enemy. Civil servants and pensioners can expect confusing regulations, requirements and caveats to come with the allowances. To begin with, despite all the talk of Nostro accounts, the allowances will be in the form of what the presidential spokesperson only described as “electronic purchasing cards”. In the best and extremely unlikely scenario, these may take the form of VISA or Mastercard debit cards; in the worst case, this is simply the government going back to the practice of creating their local version of the United States dollar. What we have witnessed with both foreign and local currencies is that electronic money will never be equal in value to physical currency if there are any kinds of obstacles to withdrawing it. Also keep in mind that whatever form these cards eventually take, they will still need to be usable in shops.
Trade unions say no
The trade unions that have responded so far have rejected the government’s offer. The Zimbabwe Congress of Trade Unions (ZCTU) called the proposal “too little too late” on social media while the Amalgamated Rural Teachers Union of Zimbabwe (ARTUZ) demanded that their 2017 salary of 520 USD be reinstated instead. The government will discover that in offering workers limited amounts of foreign currency as allowances they have opened a can of worms as future salary negotiations are more likely to feature demands for USD.
On a final note
At the end of the day it appears that rather than being the actual foreign currency that the civil service has been clamouring for all along, these allowances appear to be mere tokens meant to confuse and pacify members of the civil service. Meanwhile, the government would have once again bought itself time.