Mishma Chakanyuka, Staff Writer 
ECONOMIC experts say while the government’s decision to allow US dollar wages in public entities would improve the welfare of their staff, the move could obstruct efforts to promote the use of the Zimdollar (Z$).
It comes as monetary and fiscal authorities have been enforcing a raft of measures to strengthen the local currency, which has been unstable lately.
The Treasury gave the directive through a circular last week after receiving “a lot” of requests from various entities.
It also said it had conceded after observing an increasing number of resignations and loss of motivation due to “poor remuneration”.
The directive, however, limits the amount payable in US dollars to 40 percent of all salaries and allowances.
Economic analyst Eddie Cross said the US dollar wages would entrench the use of the US$ in the economy at a point when the government is preaching de-dollarisation.
Eddie Cross Cross is a former member of Parliament and a member of the RBZ’s Monetary Policy Committee.
“In my view, the long-term situation requires us to de-dollarise the US dollar, the rand and the pula — all six foreign currencies currently approved for domestic transactions,” Cross said.
He added that there is a need to ensure that all incoming currency is converted into local currency at a market-determined exchange rate which will then set the rate for all transactions in the economy day to day.
“However, in the current circumstances, this is not going to happen and this is a compromise for the State sector and probably wise as it will improve the competitive nature of employment in the public sector and allow for the retention of critical skills. It should not make any difference to the current exchange rate situation or the fiscal balance we have achieved,” Cross said.
Economist Tony Hawkins also argued that the move highlights the incoherence of government policies and is unsustainable.
“The public aim is to retain and strengthen the Z$ by manipulating the forex market through the auctions and interbank rate and insisting that public sector entities are paid for their goods and services in local currency etc.
“This, like the manipulation of the auction by the RBZ, is an unsustainable policy and will end in tears,” Hawkins said.
He highlighted that at some point, presumably after the elections, the government will increase the US dollar proportion of wage and salary payments, hence promoting re-dollarisation.
“Employees will demand higher overall packages as well as payment in US dollar. The latest Labour Survey by Zimstat shows that 82 percent of paid formal sector employees are earning less than the poverty datum line for a family of four,” Hawkins said.
“It is a sad and sorry reflection of an incompetent administration, trying to face two ways at once and ending up the creek without a paddle.
“The Z$ will become an increasingly marginalised currency as the economy continues to re-dollarise.”
Hawkins noted that in the long run, this would impact growth, living standards, migration of skills, deteriorating infrastructure and both the quality and volume of public services for years to come.
Mike Kamungeremu, Zimbabwe National Chamber of Commerce president.
On his part, the Zimbabwe National Chamber of Commerce (ZNCC) president, Mike Kamungeremu, said the new measure is a confirmation of the current situation in the economy where most transactions are being done in US$. He noted that the move would cushion employees by strengthening their purchasing power while also continuing to support the local currency.
“The cap at 40 percent still means that the bulk of the salaries will still come in Zimbabwean dollars and that, coupled with the government charging for services in Z$, will help in defending our local currency.
“For employers that are already generating US dollar income, it’s a very welcome development. I know some that were being forced to liquidate US dollars to get local currency to pay salaries, so the money will now go directly to the workers up to the 40 percent cap,” Kamungeremu said.
“For those that have no US dollar income, they just need to continue paying 100 percent Zimbabwean dollar salaries.
“If the current stability in the economy continues, then even those that will continue earning Z$ salaries will be fine. We commend companies that have continued to reduce their prices as the rate continues to fall.”
Economist Tarisai Pardon concurred with Kamungeremu, saying if the current stability in the economy continues then even those that will continue earning Z$ salaries will be fine.
“For employers that are already generating US dollar income, it’s a very welcome development. I know some that were being forced to liquidate US dollars to get local currency to pay salaries, so the money will now go directly to the workers up to the 40 percent cap,” Pardon said.
“For those that have no US dollar income, they just need to continue paying 100 percent Z$ salaries. We commend companies that have continued to reduce their prices as the rate continues to fall.”
Meanwhile, the country’s civil service is currently experiencing a massive brain drain and low staff morale as workers have been citing incapacitation due to low salaries. However, economist Prosper Chitambara expects this recent move to boost employees’ morale and enhance productivity in the economy.
“This just provides a bit of policy framework and clarity. It’s good for the parastatals in that it enhances morale and boosts productivity. The issue of high staff turnover of key personnel is a challenge.
“This will go a long way in addressing some of those human resources challenges that are being caused by the instability and the exchange rate volatilities,” Chitambara said.
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