Zimbabwe’s Finance Minister, Mthuli Ncube, has announced that the government will soon implement salary adjustments for civil servants.
Speaking publicly for the first time since the devaluation, Ncube acknowledged the immediate impact on incomes and prices.
He stated, “Putting in place a flexible exchange rate or devaluation does have an impact immediately on incomes, on prices. And for us as a government, we will make some adjustments, naturally, to civil service salaries to make sure that the purchasing power of the salaries is somewhat restored.”
The Minister’s statement offers some relief to civil servants who have been struggling with the rising cost of living.
However, Ncube tempered expectations, suggesting that the salary adjustments may not fully compensate for the losses incurred due to the devaluation.
He explained, “Maybe not in full, but because someone wants to get in there. So, there is bound to be pain, there’s bound to be impact, and that’s what happens with any policy. Any policy does have negative impacts and that’s what will happen. But we will make some adjustments to make sure that those who are losers can be compensated somewhat. It won’t be everybody who will be looked after, but we’ll do our best.”
This cautious optimism reflects the government’s difficult balancing act between fiscal responsibility and addressing the immediate needs of its workforce.
Ncube defended the RBZ’s recent measures, highlighting the government’s commitment to economic stabilisation.
He explained the rationale behind the devaluation, stating, “So, what the Reserve Bank put in place was a package of measures to really deal with the issue of currency stability. Now, when it comes to the issue of allowing the exchange rates to move to ZiG 25, the intention there was to make sure that the gap between the parallel market and the official market is somewhat narrowed. The idea is that you want to discourage speculative demand for credit, for speculation in the parallel market.”
The increase in reserve requirements for both domestic and foreign loans forms another key component of the RBZ’s strategy to curb inflation and stabilise the currency.
The devaluation itself aimed to reduce the significant disparity between the official and parallel exchange rates. This disparity had fuelled speculation and further destabilised the economy. By allowing the ZiG to trade more freely, the government hopes to create a more realistic exchange rate and discourage the use of the parallel market. The success of this strategy will depend on various factors, including the government’s ability to control inflation and maintain confidence in the local currency.
President Emmerson Mnangagwa, in his State of the Nation Address (SONA) to parliament on Wednesday, acknowledged the government’s challenges in managing the parallel market. He stated, “…We note with concern the resurgence of parallel market activities driven by speculative tendencies. Corrective measures are being instituted to protect all Zimbabweans from economic disruptions.”
This admission underscores the government’s awareness of the economic difficulties faced by citizens and its commitment to implementing measures to alleviate the situation.
The situation remains fluid, and further announcements and policy adjustments are anticipated as the government navigates these economic headwinds.
