. . . fails to remit US$50m deductions
THE cash-strapped government has failed to remit millions of dollars deducted from civil servants’ salaries for payment of their debts to various institutions for the past three months, exposing the workers to legal action, the Financial Gazette can reveal.The money could run into US$50 million, according to sources who spoke confidentially to this newspaper last week. It could increase this month if government fails to remit deductions for April.
This could potentially bankrupt those institutions with huge exposure to civil servants, a situation that could equally result in affected civil servants facing substantial claims from their creditors, who could possibly sue to recover outstanding debts.
The Salary Service Bureau (SSB), which processes government salaries, has not been transferring money deducted from civil servants for payment of debts from clothing and furniture retailers, banks as well as for pensions, life policies and medical aid subscriptions to the Premier Medical Aid Society (PSMAS).
Government workers constitute the bulk of PSMAS members.
Government owes the civil servants millions of dollars in money deducted but not remitted to their creditors. It may not be able to repay the workers the huge sums as it is grappling with payment of monthly salaries as well as other pressing commitments.
This week, Finance Minister, Patrick Chinamasa confirmed government’s increasing failure to pass on salary deductions under the stop system to various creditors of civil servants.
It could not be established how much of these deductions from workers’ salaries government had retained, but indications from sources were that it could run into over US$50 million.
The pension bill alone for the 553 000-strong civil service is said to run into about US$16 million per month.
The situation means that affected civil servants are now in arrears in respect of their debt payments. They may also not be able to get health cover from their medical aid society.
It is understood government has been diverting deducted funds towards funding its own programmes.
The move by government would add to banking institutions’ woes; banks are saddled with more than US$700 million worth of bad loans.
Government relies almost entirely on tax collections to fund its operations, but has consistently failed to meet targets as the revenue base continues to shrink while expenditure continues to soar.
“For the past three months, government has not remitted deductions from civil servants’ salaries to institutions the civil servants owe including banks,” said a government official who spoke to the Financial Gazette last week.
Another government source said: “Yes, there is a problem because government is failing to remit the necessary contributions to PSMAS despite the fact those deductions would have been made.”Government, which is under severe fiscal pressure, has been blamed for exacerbating the country’s woes due to its failure to meaningfully address the country’s chronic economic problems.
In the past, government had been transferring the money without delay but it appears it is now even struggling to meet its salary obligations as the economic crisis deepens.
The cocktail of problems in the country threatens to grind the economy to a halt.
After a landslide victory in July 2013, President Robert Mugabe’s government promised a better economy, but the victorious ZANU-PF administration is struggling to find solutions to the economic free fall and continues to dither over its promises.
With so much pressure exerted on fiscus, government has made moves to reduce the civil service wage bill which gobbles nearly 90 percent of government’s monthly revenues, leaving a small percentage for other obligations which include foreign travels.
Given the shrinking tax base and the need to create fiscal space to fund infrastructure development projects as a way to stimulate economic growth,Chinamasa had last week announced that government had suspended civil servants annual performance bonuses for the next two years due to dwindling state revenues.
But President Robert Mugabe assured the civil servants that they would be paid their 13th cheque.
Zimbabwe’s economy is expected to slow down this year after it grew by 3,1 percent in 2014.
Last year’s growth had initially been forecast at 6,1 percent but was later revised downwards due to tight liquidity and subdued international prices for major exports.
Now it appears the economy is slowing faster than expected and that the official growth target may not be achieved this year.
ZANU-PF had projected to grow the economy at an annual domestic target of 7,3 percent under its economic blueprint, the Zimbabwe Agenda for Sustainable Socio-Economic Transformation, which covers the period between 2014 to 2018.