Gvt Employees To Be Paid In USD, Just Call It Dollarisation Please

Minister of Finance, Mthuli Ncube and Reserve Bank of Zimbabwe Governor, John Mangudya keep insisting that Zimbabwe has de-dollarised and they get emotional (almost) when anyone suggests that we have dollarised again. I actually argue that we never de-dollarised at all since we went down that path in 2009. We were just robbed by the government innumerable times.

When they announced that a number of products could be bought and sold in US dollars, the authorities said that this ‘promotes de-dollarisation.’ Yea, whatever that means.

Today, the government has announced that it will be paying civil servants some special allowance in hard currency. Here is the full statement:

PAYMENT OF CIVIL SERVICE COVID-19 ALLOWANCES AND SALARY REVIEW

Pursuant to Government’s commitment to continuously review and improve the remuneration framework for Civil Servants, taking into account the transitory economic challenges being currently experienced in the country, which have been exacerbated by the Covid-19 pandemic, Government makes the following announcement: –

1. With immediate effect, all Civil Servants’ Salaries will be adjusted upwards by 50%. This increase also applies to all Government Pensions.

2. In addition, all Civil Servants will be paid a flat, non-taxable, Covid-19 Allowance of USD75.00 per month.

3. Govemment Pensioners will be paid a flat, non-taxable, Covid-19 Allowance of USD30.00 per month.

4. Govemment has taken due regard of the fact that addressing the wage challenges faced across the Civil Service, any salary reviews will need to be done within a holistic framework in order to ensure that such a review does not impose a negative shock in the market.

5. This interim arrangement is for period of 3 months, starting from June 2020.

6. All civil Servants and Pensioners are therefore advised to immediately open USD denominated Nostro Bank Accounts with their banks in order to smoothen the process of payment. The Reserve Bank of Zimbabwe is urgently addressing the domestic payments infrastructure in light of the increased need for “transactability”.

7. Government would therefore wish to advise members of the Civil Service that the above interim adjustments have been put in place whilst a comprehensive impact assessment and a framework for mitigating against the downside macroeconomic risks of the wage proposals made to the Government on the budget and the economy are being carefully worked out.

8. Government reiterates its commitment to payment of a living wage to its employees, whilst ensuring sustainability of the budget.

9. Government is also widening the remuneration framework for Civil Servants to introduce significant non-monetary benefits and these will be announced in due course.

MINISTRY OF FINANCE AND ECONOMIC DEVELOPMENT 17 June 2020

Smells like 2009

This sounds similar to the day Zimbabwe dollarised or adopted the multicurrency regime in 2009. At that time, basically all civil servants started receiving salary of USD100. It was actually a very good thing because the Zim dollar millions upon millions they were earning prior to that were totally worthless. This new ‘COVID 19’ stipend could just be the same thing because the currency that all Zimbabweans are earning right now is just as useless as those millions were.

If it smells like it, it probably is it. This could be the unofficial official declaration of re-dollarisation. With the crazy stuff happening in the economy right now, this would also be a good thing.

I hope the civil servants are not getting duped

The big caveat to this announcement is that the government is saying civil servants should open ‘nostro accounts.’ It is very probable that the so called USD75.00 will be deposited into these nostro accounts but the directive of the RBZ will then be that withdrawal from these accounts can only be into a local currency account with the conversion happening at the official exchange rate which is currently 1:25 whilst the parallel market rate is not to be quoted but is rumoured to be around 1:92.

If the government pulls this stunt then this is going to be yet another interesting form of thievery: snake oil….