HARARE (Reuters) - Zimbabwe’s government will not pay annual bonuses to public workers for two years because of falling tax revenues, the finance minister said on Tuesday, another sign the southern African economy is struggling.
The government forecasts growth this year of 3.2 percent, but analysts say weak commodity prices, patchy rainfall this season and company closures as a result of cheap imports and high interest rates will curtail the economy’s growth.
Finance Minister Patrick Chinamasa said in a statement Zimbabwe spends $260 million on salaries every month or 82 percent of the total revenues raised from taxes.
Chinamasa said economic activity was depressed and with more people working in the informal sector where they do not pay taxes, it was unsustainable to continue paying the bonuses.
“Conditions are such that we need to be realistic about our situation and try to live within our means,” Chinamasa said.
“To achieve this, government has decided to suspend bonus payments to the civil servants in 2015 and 2016, and the situation will be reviewed in 2017.”
The bonuses are routinely paid in November and December but were delayed to the first quarter of this year, while university staff are yet to receive their portion.
Zimbabwe finances its entire budget from taxes because lenders like the International Monetary Fund (IMF)and World Bank have said they will only resume lending to the country once it clears its debts with the global lenders.
Cutting the wage bill is part of reforms agreed with the IMF under an ongoing plan to revamp the economy.
Western countries have withheld financial aid to Harare in protest over President Robert Mugabe’s policies, including the seizure of white-owned farms, and charges that he has rigged elections to stay in power.
Analysts say the economy may grow slower than the government has projected, with agriculture affected by bad weather and commodity prices for Zimbabwe’s platinum, gold and diamond exports expected to remain weak.