IMF backs civil service wage freeze

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THE International Monetary Fund (IMF) has backed Government’s plan to impose a freeze on wage increments in the civil service for two years, starting next year.

IMF resident representative Tobias Rasmussen said the wage freeze is timely due to the significant increase in wages for public service workers recently.
Mr Rasmussen said the “huge” wage increase should be able to sustain the affected workers during the said period.
Briefing the press on the latest IMF report on Zambia, Mr Rasmussen said Government is in a good position to defend the impending wage freeze due to the significant increase in wages this year.
“IMF directors welcome the authority’s plans to freeze wage spending in 2014 and limit the cost of agriculture subsidies,” he said.
And the IMF contends that the current policy on mine taxation is reasonable and only needs to be enforced.
He said there is no need for a policy shift such as reintroduction of windfall tax, adding that the current system is sufficient and only requires adjustments.
Mr Rasmussen said the IMF believes with increased productivity, expansion and enhanced tax collection, the country will significantly benefit from the mining sector in terms of revenue.
On the 2014 budget, Mr Rasmussen said Government should ensure it makes significant efforts to ensure the set targets are met.
Meanwhile, the IMF has welcomed the country’s strong economic performance over the past decade, which is underpinned by prudent macroeconomic management.
The report however notes that the outlook is subject to significant risks from the recent widening of fiscal imbalances, reduced external buffers and volatile copper prices.
The IMF has since recommended containing the fiscal deficit, accelerating public financial management reforms, strengthening external public financial management reforms and improving the business environment, among,other things.
The report states that there is need for comprehensive policy action to address unsustainable fiscal position following the spike in wage and subsidy spending.
IMF has further called for strengthening of public financial management through improvements in budget planning, fiscal reporting, and expenditure controls and debt management coupled with strict oversight and accountability.
“Strengthening debt management and project assessment capacity is critical, given the planned rise in infrastructure spending and recourse to non-concessional borrowing,” the report reads in part.
IMF has advised against issuance of the proposed sub-national Eurobonds in favor of sovereign bonds and have stressed that all external borrowing should be subject to project appraisal and screened for consistency with macroeconomic stability, among other things.

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