FINANCE and Economic Development Minister, Professor Mthuli Ncube, has backed calls for public and private sector wage increases to cushion workers from price escalation linked to foreign currency exchange rate distortions.
Although Government has established the interbank exchange market, speculative parallel market activities continue to pile pressure on the pricing structure of the economy.
In his latest economic update this week, Prof Ncube admitted wage compression has become a contentious issue in the economy as buying power constantly trails price increases.
“In the current environment, both wages and purchasing power have taken a big hit. Government, therefore, has a responsibility to support consumers and the private sector as a whole,” he said.
“As part of the currency reform agenda, we have had inevitable wage compression. This is part of the liberalisation process. We have responded by propping up the wages of the civil servants, and we hope the private sector acts in kind.”
Recently, Government increased monthly pay for its workers to about $2 500 for the least paid from about $1 033. Despite the return of the Zimbabwe dollar last July, the minister said the dollarisation hangover remains high with several businesses still pricing in US dollars and simply translating it to the local currency.
“This is squashing the purchasing power of current wages. We are closing that gap by allowing wages to rise,” he said.
As Government focuses on growing the economy this year, the minister said reining in inflation “as quickly as possible”, was his key target. This is crucial for investment, he said, adding that the new dispensation’s drive to create more jobs was dependent stable inflation.
He noted that while month-on-month inflation was stabilising, recently settling at approximately 16 percent, annual inflation remains high.
“That is what happens when you liberalise a currency. But this process of reforms is a long-term necessity for our economy. We are taking steps to prop up the currency, drip-feeding in cash injections in a non-inflationary manner,” said Prof Ncube.
He expressed optimism that the country’s economy will overcome the numerous hurdles towards desired prosperity. He, however, stressed the need for hard work and proper planning backed by prudent monetary and fiscal discipline. The negative impact of climate change and subsequent droughts, which have hampered food security as well as sanctions, are among the top barriers to growth. Prof Ncube said measures were already being put in place to “climate proof” the agriculture sector as well as double efforts with international partners.
Despite all the hurdles and all the barriers, Zimbabwe in 2019 leapt 15 places on the Global Ease of Doing Business rankings. The country is keen to improve this year with privatisation being part of a bigger picture.