THE government must increase civil servants’ salaries in the upcoming 2021/22 financial year budget or brace for crippling strikes by unhappy workers, TKM Consultancy economist, Letsatsi Sephepha has said.
Finance minister Thabo Sophonea is expected to present the 2021/22 financial year budget estimates next month and Mr Sephepha has suggested that the government must direct the bulk of its resources towards the recurrent budget and avoid clashing with its workers.
The recurrent budget, also known as operational budget, includes line items such as wages, utilities and rent payments.
Mr Sephepha said the government must allocate 55 to 60 percent of its whole budget toward the recurrent budget to enable salary increments for civil servants if it is to avoid clashes over demands for salary hikes.
“Between 55 and 60 percent must go towards the recurrent budget if the government wishes to increase salaries for the civil service or else there will be a serious clash if there are no increments,” Mr Sephepha said.
Mr Sephepha predicted that civil servants would demand salary increments to keep up with the ever-increasing prices of goods and services.
“Production was on its lowest in the past year due to Covid-19 restrictions. This resulted in the rise in commodities prices. There is going to be a serious challenge when civil servants demand salary increases due to hikes in the prices of commodities. For that reason, the government is going to be forced to increase the recurrent budget,” he said.
While the government might have to reduce its spending due to lowered revenue collections owing to the adverse impact of Covid-19, the situation warrants for salary increments. This is especially so after the five percent salary increment effected in the 2020/21 financial year was swallowed by exorbitant taxes, he said.
“The increment was as good as non-existent given the increase in value-added tax (VAT) on commodities. It was no different from the previous year (2019/20) when there was no increment. It is a serious challenge when salaries remain low yet market prices are increasing. Therefore, a conflict must be expected if civil servants do not get salary increments and fail to keep up with their financial commitments such as loans and insurances,” Mr Sephepha said.
The government must invest in the private sector to create jobs and relieve itself of its current huge expenditure on salaries as the major employer.
“It is time for the government to finance small business enterprises for job creation. This is not the time for people to look up to the government for employment. Sound and sustainable economies are built on small business enterprises. The time for people to make a living out of government tenders are over especially now when it takes them as long as two years to be paid for services they have provided,” Mr Sephepha said.
Attempts to get a forecast of the budget from Mr Sophonea failed as he said he was caught up in meetings.
Last June, the International Monetary Fund (IMF) predicted massive fiscal shocks as countries make tough budget allocations on the back of Covid-19-related economic disruptions.
“The preparation of the 2021 budget will need to take stock of the impact of the Covid-19 crisis on the economy and the government’s fiscal position; evaluate the fiscal space for continued priority crisis spending and recovery measures; assess the government’s financing needs; and enhance transparency and accountability by providing a proper presentation and accounting of Covid-19-related fiscal responses, including off-budget measures,” the IMF advised.
The IMF has repeatedly urged Lesotho to employ fiscal prudence and arrest high expenditures.
Following a visit which ended on 26 April 2019, the IMF noted that due to the continuously declining Southern African Customs Union (SACU) revenues which were below historical averages, the government had run into fiscal difficulties. The organisation said this had also been coupled by persistently high government expenditure, which has led to the emergence of government payment arrears.
“Lesotho continues to face significant challenges, stemming mainly from the declining SACU revenues and high government expenditures.
“Against this background, the IMF underscored the need for both short and medium-term measures to preserve fiscal and external sustainability, as well as generate strong and inclusive growth,” the IMF said after the 2019 visit.