Govt defies IMF/WB advice on wage hikes



MASERU – Despite complaints from the World Bank and International Monetary Fund (IMF) the Government’s wage bill continues to escalate without any feasible instruments to reduce it. Economists claim the government will not be able to reduce the wage bill that is already a burden to the fiscus unless it makes informed financial decisions ahead of political expedience and put in place instruments that will help eradicate youth unemployment.

The concern by economists comes after finance minister Moeketsi Majoro proposed a 5% salary increment for civil servants while delivering the annual budget speech over a week ago. Analysts note that the Government cannot afford the 5% salary increase but is compelled by inflation to proceed with the raise for civil servants.

Financial analyst Robert Likhang said the government already has a huge wage burden and the increment will worsen the situation especially given that there are no credible ways in place to broaden income streams. This, he said, puts doubt on whether the Government will afford and sustain the increment further adding that decision to increase salaries was more of a political one than an economically thought-out decision.

“However even having said this, the country is still struggling with inflation which hits civil servants given that they were not given any raise last year, therefore the increment is a good gesture to show that the government is aware of civil servants’ financial burden.

“Not giving them a raise or at least something equivalent to inflation reduces their buying power. In spite of a high wage bill, since civil servants were given 0% increase last year it is a good gesture to meet civil servants half-way so that they can be able to survive.

“Although we talk a lot about youth unemployment there are no instruments in place to ensure youth are engaged. It is one thing to talk about eradicating youth unemployment and being politically sensible but quite another to see the work on the ground,” he said. Likhang said the government could provide tax incentives to companies in exchange for hiring youths and affording them skills and experience whether under full employment or internship programmes.

“The government can make an arrangement to reduce tax to companies that will employ youths that are 35 years and below and have not been employed for the past two years, mostly because youths struggle to get jobs because of lack of experience,” he said.

He further noted the country could also start programmes similar to Black Economic Empowerment (BEE) which is a racially selective programme launched by the South African government to redress Apartheid-era inequalities by giving black South African citizens economic privileges that are not available to whites. Only that Lesotho will focus on youths.

The BEE programme is a form of affirmative action. Although race is the overriding factor, it includes measures such as employment preference, skills development, ownership, management, socio-economic development, and preferential procurement.

Likhang said he expected the budget speech to address the fact that the government will concentrate on domestic business development as that will solve a lot of financial, unemployment, education, health and social problems. Economist Letsatsi Sephepha said the 5% increment will not bring any change in civil servants’ financial status, especially for those in lower grades.

He said already inflation increased by 5.8% meaning there is still a shortfall of 0.8% to secure civil servants’ buying power. Sephepha said the government is not just failing to put in place instruments to eradicate unemployed but also disgruntle the already working class.

He said the salary increment will only bring change to people that already earn more but as for those of lower grades, no financial difference will be experienced as they will continue to struggle to buy and meet their financial needs and many are therefore forced to live on overdraft.

This comes after minister of Finance Moeketsi Majoro in his budget speech noted that for the past three years the government has been leading an effort to rebuild the country’s economy within challenging economic and fiscal condition.

He said the coalition government inherited a financial and economic crisis characterised by depleted international reserves and slow structural growth. Majoro said the problem has persisted and now fully comprehends that the country’s woes emanate, in part, from factors the country has no control over.

“Persistent economic slowdown in South Africa, slow growth of our exports and volatility of SACU revenues – none of which Lesotho has control have negatively impacted our economy. The domestic and external reserves cushion which Lesotho has control over were already depleted in 2017, and thus provided little policy cover to absorb the external shocks,” he said.

Majoro proposed that 2020/21 salaries and wages be adjusted by 5% across board, to offset the projected inflation rate.


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