Government is likely headed for a showdown with civil servants if it pays their month’s earnings in the ‘eroded’ local bond note currency.
Due to the recently introduced two percent tax and parallel market rates favoring the US dollar, shops and retailers across the country have increased their prices fast making bond notes valueless.
Some shops are even demanding US dollars upfront while others have closed saying their suppliers prefer foreign currency, which is hard to come by and buy from the parallel market.
Both businesses and ordinary people have objected to the new two tax percent, arguing that it cuts into their savings and called on the government to intervene.
But the government said the tax was a painful but necessary move to increase revenue.
If the price hikes continue, the government would be in a fix come month end as it has to pay civil servants salaries yet it cannot afford US dollars that seem to be the currency of choice.
An economist from Bindura Science and Education, Dr Felix Chari, told CITE government could only afford to pay salaries through the RTGS transfer, which is in bond note form.
He argued this situation was problematic because the rising exchange rate has eroded the real income rate for civil servants.
“With the value of the bond note going down government will be in a fix come end of the month when it has to pay salaries. It cannot pay salaries in bond notes as that will not match market rates and this may likely cause a rift with civil servants,” he said.
Dr Chari predicted that protests would emerge if the government did not make proper payments and please its workers.
“This will likely lead to protests as the government pays bond through the RTGS system. Most civil servants earn around $500 and according to the parallel market rate that money is US120, which is hardly enough to pay rent. This situation will be disastrous as we may see protests and job boycotts,” he said.
Dr Chari added: “Already there are some workers who opt to sleep at their workplaces because they cannot afford the cumulative commuter fares they pay to and from work. How long do you think they can take this situation”.
The economist added that government is unlikely to increase salaries this month to match the prevailing situation as the payrolls have been processed
“But definitely next month, government has to increase salaries and make sure what workers earn reflects the situation in the ground,” Dr Chari suggested.
Government has directed that prices of basic commodities increased without justification be reduced immediately and threatened to revoke licenses of those found to have hiked their prices.
So far shops are yet to heed that call.
The Zimbabwe Congress of Trade Unions had planned protests across the country against the new tax on money transfers but have since been stopped by police