In a report from Agence France Presse, Tendai Biti told reporters in Harare that Zimbabwe would have $217 remaining after it paid government workers, leaving the nation’s finances in a state of paralysis.

 

Zimbabwe had extraordinarily high levels of inflation in 2011 and 2012 which the IMF claims have only recently moderated at levels beneath the 9.5% before.

 

A mining boom drove the salaries of government workers higher as inflation rose and when the demand began tapering off, the higher wages have become difficult to maintain.

The International Monetary Fund’s comments:

Despite better-than-expected revenue performance, central government operations recorded a cash deficit of 0.6 per cent of GDP in 2011 and domestic arrears accumulation of about 1 per cent of GDP, due mainly to two salary increases that raised employment costs by 22 per cent, crowding out social and capital investment.

The effect of the salary hikes was compounded in early-2012 by an increase in employee allowances and unbudgeted recruitment.

Fiscal pressures were exacerbated by significant under-performance of diamond revenues during the first half of 2012. In response to the fiscal slippages, in July the government announced expenditure and revenue measures, as well as a reassessment of diamond revenue flows. The measures include a hiring freeze, suspension of a number of diamond-revenue-financed projects, increases in excises on fuel, and enhanced monitoring of the mineral resources.

 

[The Globe and Mail]