Wage bill threatens Zim recovery

The unity government of President Robert Mugabe and Prime Minister Morgan Tsvangirai is under pressure from state employees to up their salaries, pegged at an average $250, but the coalition is already squeezed with wages taking up 70 percent of the countrys revenues.

Mugabes ZANU-PF and Tsvangirais Movement for Democratic Change (MDC) are embroiled in a bitter role over cash from diamond sales from Marange, which Mugabe has said is available to pay civil servants but finance minister Tendai Biti says the money is yet to reach treasury.

Economic analysts said the salary bill was unsustainable, reflecting Zimbabwes government was still focusing on consumption at the expense of creating jobs and building infrastructure.

This state of affairs will clearly impact negatively on economic recovery. It is unsustainable to achieve growth with a budget that focuses only on consumption, said John Robertson, a Harare-based economic consultant.

Biti told parliament this week that revenue inflows for January amounted to $168 million, accruing a $34 million deficit. Of this amount, $117.6 million was spend on salaries, pension and medical aid.

Zimbabwe is struggling to attract foreign funding and investment, leaving little room for the finance ministry to generate revenues to meet its budget obligations.

This has left cash from diamonds the only source to appease civil servants in a year that will likely see fresh elections.

Mines Minister Obert Mpofu has said there is enough money from Marange diamonds to increase wages for public servants, which Biti has dismisses as false and told parliament on Tuesday Monday that he was instituting an audit to trace the money.

Biti has said ZANU-PF was secretly selling diamonds from Marange, where a Chinese-owned Anjin and a company owned by the army are part of four firms allowed to mine diamonds in the controversial area, the sight of gross human violations by the army against unarmed illegal diggers in 2008.

This is in violation of the Kimberly Process, the global diamond regulator that has allowed Zimbabwe to conduct two gem auctions.

The International Monetary Fund has said the southern African country should put a tight lid on rising wage demands in the public sector, amid fears the government may buckle to the calls for higher salaries to appease voters ahead of possible elections this year.

The economy has started to grow after a decade of contraction, which analysts attribute to the formation of a unity government between long time rivals Mugabe and Tsvangirai.

We are back at kukiyakiya where money is just going to salaries. (This) leaves very little room for other government operational requirements as well as projects. It means certain areas will have to suffer, he said.