Slash public sector wage bill: World Bank

HARARE - Our Deputy Business Editor, Ndakaziva Majaka, talks to World Bank’s (WB) outgoing country manager, Camille Nuamah, whose tour of duty ran from June 2014.

NUamah will be succeeded by WB’s sector manager for Urban Development and Services in East and Southern Africa, Rosemary Mukami Kariuki, who will take over from August 1, 2017. Find below excerpts of the interview.

Q: During your three-year term, has the Zimbabwean economy grown or progressed in any way?

A: I think it did. I guess one of the biggest challenges that we had as the WB is we may not have communicated, but it is not really our place to communicate but we have been encouraging the government to communicate better in terms of progress.

But I think Finance minister Patrick Chinamasa’s speech recently was a good example of telling what they are doing, how they are doing it and how we are supporting them, because all these actions are not really ours, but our job is to support the clients to make the changes.

So, if you ask me if we have made any progress on reforms and reconstruction of systems — which was our major goal — I think so, yes.

Q: Why do you say so, because for many Zimbabweans, the situation has steadily deteriorated over the past three years?

A: I can say that proudly because we have a new procurement law, which takes some countries a really long time to do and in Zimbabwe you put it together and got it passed in three years.

Some of the things may not look like big giant things, but from where we sit in the WB, these things will be able to make all the difference in the future.

Q: You say the country has taken steps towards the right direction, what are some of the things the government managed to do with the assistance of the WB during your time in Zimbabwe?

A: We have made progress on public financial management, we have made progress on understanding the impact of poverty; public expenditure on poverty; and I can point to small changes that the government has made that signal that there has been a change of direction.

And in my view, this change in direction has been much more significant than the distance gone in the same direction, really.

Here in Zimbabwe I have seen a lot of shifts of direction. Maybe they started before we came, but the technical assistance we have provided put clarity and then the government took them and moved all.

Q: In your view, which areas have changed?

A: All sorts of things, procurement, public financial management, understanding the impact of poverty — a small change that the government implemented after concluding the IPRSP (Interim Poverty Reduction Strategy Paper) — and the programme budgeting that we have done in the ministry of Social Welfare, they realised that everything was going to pensions and very little to safety nets, so even with fiscal constraints, they shifted the money to safety nets and the donors responded, little by little.

However, the shift is what is important because the donors are preparing to respond again.

The issue of the pensions will take a while, but they thought about the policy they want and they kind of know where they are going.

So, just having the directional change and a new goal in sight is a much bigger change than if you just move in the same place and I think we have done lots of that; very quietly because the style of the bank is that this should all be about the ownership of the client country.

We also have a water project that has not really started to affect anybody’s water supply yet, but it is looking at the relationship between Zimbabwe National Water Authority and the local authorities and writing service level agreements that can clean up and improve service delivery.

Those things have a long term impact, so we spent a lot of time building systems and this was very easy because the systems were in place and just needed modernising.

You have a very strong institutionality and people follow the steps.

Sometimes the steps are yesteryear and need to be modernised, but once they are modernised people follow the new steps.

Q: It is interesting that you mention that the WB has helped government work on systems and structures, because Zimbabwe has been accused of coming up with brilliant plans and blueprints but failure to follow through. Do you feel there is enough will power in government to stick to these systems being crafted?

A: Yes, because mostly we were being guided actually — people find this very surprising when I say — but look at the programme budgeting for instance, we did not really want to do it.

We thought this is really ambitious and very few countries have done it.

But the ministry of Finance and some other donors who had helped in the past said, “no, these guys are really driven and you should help them”.

There is also the National Financial Inclusion Strategy, way too big for what I thought we could do, entirely driven by the Reserve Bank of Zimbabwe (RBZ).

We had some guys come in here on money laundering the first three weeks that I was here, and they were shocked by what is on the ground.

They said, normally, we have to introduce the tool and help them fill out the tool, but the Zimbabwean team had gotten the tool from another country and already filled out all the forms and ready to talk serious technical things.

So, we have all that to build on.

Q: So, what is the problem then?

A: One of the challenges of course here is to get agreement and as minister Chinamasa says all the time, that is his job.

We are to provide all the technical advice and encourage all parts of government to work together.

So, that is what we have been doing.

Q: Zimbabwe has been working towards debt sustainability, which also involves clearance of arrears to multi-lateral lenders; do you feel the country is on track with this goal?

A: This is just the first step and is not the end goal. We are in this not for that end goal, but for the long term debt sustainability of the country.

So, people always ask us, “when is that going to happen?” I always say, it will happen whenever, in line with all the other bits that are needed to get to the end.

We are keeping our eye on the price here, and the price is not the arrears clearance but the debt sustainability and access to capital markets.

Q: But with regards the arrears, the minister of Finance has admitted that the process has been slow, why do you think the process has been slower than anticipated?

A: Because as they have been progressing on the process the economy has been shifting, different developments have taken place, globally and locally.

So, these things influence the process. This process does not happen in isolation of the events taking place throughout the world.

The world has been pretty volatile this year, so this may have slowed down the process.

This means they have to raise capital, they have to put all the bits and pieces together and another contributing factor is the world around them.

It is starting to look uncertain, things happen every day and this was not the case when we laid out a plan in October 2015, it was little bit more predictable both locally and globally.

Q: We cannot really conclude without talking about the issue of the country’s rising inflation. When you came the country was in deflation but it has stated creeping up, with analysts projecting positive inflation by year end. Do you think the pressures may hit the 2008 record levels, given next year’s upcoming election?

A: So this is part of the development of any country. You guys are going through a major structural transformation.

You can’t come from a country with its own currency through hyper-inflation, dollarise, face the global economy, and all the things that happened.

The market needs to become more competitive and shift towards exports because that is how you survive in that kind of climate, the deflation was part of that adjustment and correcting the pricing levels in the economy from where you pinned them when you dollarised.

The inflation reflects your challenges in the monetary system. But you guys have much more experience with this than us.

Personally, the government is aware of the risks and I think that they will be managing the situation far more carefully. Not just the risks, but the costs of what happened before. So I don’t think they will make the same mistake twice.

Q: There is also the issue of cash shortages, what do you think is causing this and do you feel there is a chance for the country to emerge out of the black-hole soon?

A: I think there is a huge chance of surviving this, but it will require doing some very difficult things in the short run.

Firstly, you have to deal with the wage bill. The size of the government is really honestly unsustainable, but for a government that has always seen itself as the last resort of all things, to scale that back and push some responsibilities would be tough.

Those are hard decisions and not easy to implement because you have been operating a certain way for so long, you then cannot say to someone we are firing you just like that, it is tough.

But if you manage to make these difficult decisions, it will fall into place.

I really think that the turnaround in Zimbabwe is not prolonged.

Zimbabweans are so pessimistic and it is very difficult and I understand how people are facing this cash thing on the ground.

But we are also trying to push and make sure the electronic systems are secure.

We are doing work on the payment systems to help have the systems go through faster, it will obviously take the pressure off the cash demand especially the part affecting people on the grassroots.

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