FINANCE Minister Tendai Biti faced down public sector unions on Wednesday as he rejected demands for wage increases in his mid-term budget review.
Biti revised his 2012 budget down from US$4 billion to US$3.640 billion after writing off US$600 million which he had projected to come from diamond revenues.
He said the shortfall in receipts meant that “the business as usual approach will not hold”, and the government has to “act decisively, with unity of purpose and shared vision that is underpinned by an unquestionable value system of... living within means”.
This required the extension of a freeze on public sector recruitments, elimination of “ghost workers” from the government payroll and “aligning any wage reviews to economic improvements”.
“The employment costs have become an elephant in the living room when viewed against overall expenditures,” Biti told MPs.
“The wage bill, which was originally targeted at 57% of the total budget, will inevitably end the year at 73%.”
Between January and June, the minister said US$1.167 billion had been spent on public sector pay, US$94 million more than what was projected in the budget and representing 70 percent of the total budgeted wage bill.
Unions have threatened strikes to demand wage increases, but Biti warned that without a marked improvement in government receipts, any pay adjustments would bankrupt the government and reverse three years of economic growth.
“Government faces the real danger of defaulting on salary payments,” Biti said, grimly. “Hence, we need not take the current monthly payments for granted, but seriously appreciate the limited fiscal space for wage adjustments.
“In simple terms, the thrust of this Mid-Year Fiscal Policy Review is anchored on turning the long winter of despair into the summer of growth.
“This will be guided by our principle of eating what we are killing and living within our means."
Unions, who negotiate under the Apex Council umbrella body, said on the eve of the budget review that they hoped Biti "will come up with something reasonable".
Threats of industrial action will only grow after the minister's snub.