Diamond revenues must improve infrastructure
A contribution of EfD/EPRU Research Fellow Edwin Muchapondwa to the policy debate in Zimbabwe
Zimbabwe’s civil servants offer vital services to the nation and they deserve decent pay. Unfortunately, the government’s purse has not recovered from the crisis of the last decade.
Recent media reports indicate that the Zimbabwean government has only managed to raise revenues of about US$168 million every month since the beginning of the year. About 70 percent of this is gobbled-up by the monthly civil service wage bill of US$117 million. Clearly, this does not leave much for other government recurrent and capital expenditures. These statistics also show that the government cannot increase the civil service wage bill without running an undesirable budget deficit. This situation points towards the need for the country to improve its recurrent revenue generation.
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Some people have suggested that civil service pay can come from government’s US$174 million diamond revenues. In government, as in business, one does not sell one’s capital to pay a wage bill. It is as imprudent for a nation to sell off natural capital to finance recurrent expenditure as it would be for a farmer to sell his land to buy bread.A well- established economic recommendation, the Hart-wick rule, advises that incomes from non-renewable resources such as diamonds should be invested in productive assets such as machinery, roads, schools and even clinics. This keeps income and welfare levels from falling in the future when the mineral reserves are exhausted. In fact, we need to scrutinise the proceeds from sales of all minerals meticulously. After years of neglect Zimbabwe’s infrastructure needs work. The revenues from diamond sales should be earmarked for this purpose, especially since this will speed up the country’s economic recovery. It is that recovery which will enable us to increase pay levels in the civil service.
Some people have suggested that civil service pay can come from government’s US$174 million diamond revenues. In government, as in business, one does not sell one’s capital to pay a wage bill. It is as imprudent for a nation to sell off natural capital to finance recurrent expenditure as it would be for a farmer to sell his land to buy bread.A well- established economic recommendation, the Hart-wick rule, advises that incomes from non-renewable resources such as diamonds should be invested in productive assets such as machinery, roads, schools and even clinics. This keeps income and welfare levels from falling in the future when the mineral reserves are exhausted. In fact, we need to scrutinise the proceeds from sales of all minerals meticulously. After years of neglect Zimbabwe’s infrastructure needs work. The revenues from diamond sales should be earmarked for this purpose, especially since this will speed up the country’s economic recovery. It is that recovery which will enable us to increase pay levels in the civil service.
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