Friday, October 18, 2013

Match higher salaries with productivity - IMF
By Chiwoyu Sinyangwe
Wed 25 Sep. 2013, 14:01 CAT

THE recent sharp increase in minimum wages and a large pay award to civil servants needs to be matched by higher productivity, says the IMF.

And Secretary to the Treasury Fredson Yamba has revealed that next year's budget will focus on reducing government expenditure as a way of containing rising fiscal deficit which has accelerated from targeted five per cent this year to 8.5 per cent of the gross domestic product.

Meanwhile, the International Monetary Fund says Zambia's economic growth will slow down to six per cent this year before picking up seven to 7.5 per cent between 2014 and 2016.

IMF advisor for the African Department and head of the latest mission to Zambia John Wakeman-Linn said the increases in wages had put pressure on labour costs for the private sector and the government.

"To maintain strong economic growth, it will also be important to safeguard competitiveness and build buffers against external shocks," he told journalists during a joint press briefing with Yamba.

More neoliberal garbage. These people should hang their heads in shame, over the state of the African continent. A continent, whose economies have been sabotaged by IMF and World Bank recommendations for over 30 years now. Read:

(GLOBALRESEARCH) Somalia: the Real Causes of Famine
By Prof Michel Chossudovsky
Global Research, February 21, 2013
Globasl Research 21 July 2011

"Last year's sharp increase in minimum wages and this year's large pay award to civil servants are putting pressure on labour costs in both the private and public sectors. Competitiveness may suffer if the higher wages are not matched by higher productivity."

And Wakeman-Linn revealed that Zambia's fiscal deficit is this year expected to increase to 8.5 per cent from the initially targeted five per cent of the GDP due to government's expansionary expenditure.
He said the current government lacked enough revenues to fund its programmes.

"Government expenditures in 2013 will be significantly above budget, including from fuel subsidies incurred before retail prices were raised on May 1, the civil service wage increase that came into effect this month, and costs of recovering the Food Reserve Agency's operations and outstanding debt," Wakeman-Linn said.

"In addition, the revenue is short of target. Altogether, the budget deficit for the year is now expected to reach about 8.5 per cent of the GDP."

Meanwhile, Yamba revealed that next year's budget would be focused on increasing revenue collection and reducing expenditure to contain the widening fiscal deficit targeted at five per cent of the GDP next year.
The IMF also revealed that government debt as a proportion of the GDP has accelerated from 32 per cent last year to 37 per cent this year.

"We agreed on measures to reduce the deficit as we move forward in the medium term," said Yamba. "This entails that we need to tighten our expenditures and also reduce our borrowing and at the same time, we need to broaden the tax base. That is the only way you can reduce the deficit. So, on the revenue side, you broaden your tax base and then you look at the expenditure side and tighten it. When the budget is presented in the course of next month, we shall then give you the details because we cannot pre-empty the budget this time which will be presented on October 11."

Wakeman-Linn said Zambia's total debt burden was expected to accelerate to 37 per cent of the GDP from last year's 32 per cent.

"The current projections are that both the stock of domestic debt will be a little of 18 per cent of GDP by the end of this year and similarly the stock of external debt will be a little over 18 per cent of GDP this year…combined almost 37 per cent of GDP," said Wakeman-Linn.

"Last year's position, the combined was a little over 32 per cent of the GDP. The mission very much welcomes the government's plans to comprehensively address the fiscal challenges in the budget for 2014. By a combination of stepped-up revenue collection and tight expenditure control, the draft budget aims to bring the deficit to five per cent of the GDP, similar to what was originally planned."

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