Zambian president gives World Bank the cold shoulder, lifts freeze on civil service wages and hiring

Country however faces a tough balancing act however as public pay absorbs as much as 75% of state revenue, prompting donors to urge caution

ZAMBIAN President Edgar Lungu lifted a public-sector wage and recruitment freeze, appeasing labor unions while putting pressure on the nation’s fiscal deficit. 

“The labor movement felt that government had cut a pound of flesh out of the small” and struggling civil service, the ruling Patriotic Front said Friday on its Facebook page. 

“The lifting of the recruitment freeze will address the plight of many unemployed young people in Zambia.”

Finance Minister Alexander Chikwanda had said the government would freeze salaries for its workers in 2014 and this year to control wage costs, which absorb as much as 75% of state revenue. 

The decision to lift the freeze follows the closely-fought election of Lungu in January, three months after Michael Sata died in office. He faces another election next year and will be looking to shore up support in the country.  

Zambia’s annual inflation rate was 7.2% in April, unchanged from the month earlier. 

The World Bank’s lead economist for Zambia, Praveen Kumar, on April 21 warned the fiscal deficit will be larger than planned and recommended the state consider maintaining the wage freeze, reducing expenditure and eliminating fuel subsidies. 

The government this month scrapped a plan to raise more taxes from mining companies, decreasing revenue which may result in spending cuts or more borrowing, Deputy Finance Minister Christopher Mvunga said last week.

Zambia is Africa’s second-biggest producer of the metal after the Democratic Republic of Congo. Production is projected at 839,000 metric tonnes this year, or 130,696 tonnes lower than projected in the national budget.

Last week officials said the country faced a “big challenge” in meeting its 7% growth target for this year due to sluggish production in mining and agriculture.

“We are yet to see what the actual output in agriculture will be,” Denny Kalyalya, governor of the southern African country’s central bank, said in an interview with Bloomberg after giving a speech in the capital, Lusaka.

“We are also yet to see what clarity in the mining sector will bring.”

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