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IS BALLOONING GOVT WAGE BILL WORTH THE NOISE?

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The civil service salary review was announced in July 2016, with proposed pay rises ranging from 17 per cent to 38 per cent backdated to April 2016. In real numbers, the wage bill is expected to cost government E850 million or two per cent of GDP against the initial budgeted E500 million.


This is notwithstanding the fact that government is facing a serious fiscal crunch due to the decline in Southern African Customs Union (SACU) revenues, and now adding to the pressure, a wage bill in the 2016/17 financial year that has increased to an estimated 47 per cent of recurrent expenditure.


What happens every month-end when government has to fork out all of this money to pay civil servants? If the pressure does not fall onto the Swaziland Revenue Authority to tax every component of economic activity in the country, the alternative is to increase domestic borrowing just to ensure that employees get paid.


The wage bill is a topical issue of government expenditure because of two simple reasons. The first is that government cannot afford it anymore because the public revenue base has been eroding, which means government has less money than it used to have before. Secondly, is that the wages are crowding out other types of government expenditure that could be dedicated to quality service delivery, especially in areas of health, education and infrastructure.


If government could adjust the wage bill into a more affordable and sustainable level, then more money would be free to tar our gravel roads, pay elderly grants, and provide medicines in hospitals, among many other critical service delivery needs. So what is most likely happening is that government operates month to month on a frenzy of collecting the little bit of money that is available to meet the huge salary obligations at the expense of other critical services.


To address the issue of the ballooning wage bill, government has two options: one is to adjust the wage bill so that it decreases permanently over time as a percentage of GDP and as a share of government expenditure. The other option is to be deliberate and cut down the wage bill by leaning out a lot of government positions to achieve fiscal sustainability.


In fact, leaning out government positions is probably the most important aspect of building a more sustainable civil service wage bill. Government has to be more effective and efficient in implementing the different development goals within a set and sustainable government structure.


The reality is that the real increase in the cost of the civil service is due to expansion of government positions, the employee head counts, with most increases occurring within the Ministry of Education, Police, and Defence.

The point is not to put people out of jobs, especially given the fact that most of the civil servants like many employees in the urban areas of Swaziland provide financial support to rural communities who would otherwise have nothing to sustain their daily needs.


Part of the civil service wage bill also contributes to the aggregate demand for goods and services in the economy, and so prevents the economy from shrinking or total collapse. So it is clear that we need people working for government, and these government employees are also an integral part of the economy, because they too spend their salaries in the economy and thus keep the economy going. However, the civil service wage bill cannot keep growing forever. More government money needs to be focused on delivering key services that will benefit the nation as a whole.


Fortunately, government does have a debt policy in place that determines how much acceptable domestic debt the country can sustain at any one given point in time. Therefore, in Swaziland domestic debt is capped at 25 per cent of GDP, and government does not impose limits on external debt.

Though the sky is supposedly the limit on how much external debt we can have as country, we should not be borrowing from other nations to pay our own civil servants. It makes sense to get loans on some of our capital projects, but it would be irresponsible to borrow money just to pay people to occupy offices. Let’s make our money pay for the things that matter, and not to fill pockets that will suck us dry.

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