Dollar Shortage Forces Zimbabwe to Delay Military Pay

  • Finance Ministry blames revenue shortage, cash-flow challenges
  • Military to be paid June 27, compared with normal June 12 date

Zimbabwe is delaying salary payments to army and air force personnel by two weeks because of cash shortages at the Finance Ministry, as an economic crisis deepens in the southern African nation.

President Robert Mugabe’s administration took the decision because of a worsening shortage of dollar notes in recent months. Since abandoning its own currency in 2009 to end hyperinflation, Zimbabwe has used mainly U.S. dollars, as well as South African rand, euros, and British pounds. The government spends about 83 percent of its revenue on wages for state workers, according to Finance Minister Patrick Chinamasa.

“Against the background of severe revenue under-performance and the related cash-flow challenges, government has been honoring its monthly wage obligations, albeit through shifting pay dates,” Willard Manungo, secretary for finance, said in a circular dated June 16 that was sent to the military and civil service, and obtained by Bloomberg.

While the government has been postponing paydays for civil servants since 2014, it hasn’t been clear previously if the military was affected. Some soldiers looted shops in the capital, Harare, in 2008 when their pay was delayed at the height of Zimbabwe’s hyperinflation crisis, triggered by a failed land reform program that slashed agricultural exports. At that time, inflation accelerated to about 500 billion percent, according to the International Monetary Fund. The economy has halved in size since 2000.

Cash Crisis

“The cash crisis affecting the security sector is of a serious nature,” Pedzisai Ruhanya, director of the Harare-based Zimbabwe Democracy Institute, said by phone. “History has shown that many authoritarian governments have fallen after support is withdrawn from the defense forces.”

Mugabe’s ruling Zimbabwe African National Union-Patriotic Front has been wracked by internal divisions, leading to the formation of a splinter party, Zimbabwe People First, by Joice Mujuru, a former vice president and guerrilla fighter in the war of independence against white-ruled Rhodesia.

Zimbabwe’s military and air force will be paid on June 27 instead of the 12th of the month, while police and prison staff will receive their salaries on June 30, Manungo said. Teachers and medical staff will be paid between July 7 and July 14 because the government can’t meet the June 20 payday, Manungo said in the circular.

Revenue Drop

The Zimbabwe Revenue Authority, known as Zimra, said first-quarter revenue was $724.9 million, below a target of $861.8 million. The country plans to introduce so-called bond notes in October that will be pegged to the U.S. dollar, will be printed in Germany and will hold no value outside Zimbabwe. The Cairo-based African Export Import Bank will underwrite as much as $200 million worth of bond notes. The crisis has forced some banks to limit cash withdrawals from ATMs.

The divisions within ZANU-PF mean the security forces depend on Mugabe more than ever, probably ruling out large-scale protests, said Professor Dirk Kotze at the University of South Africa.

“Without Mugabe, they have no caretaker,” Kotze said Monday by phone from Pretoria, the South African capital. “The military is in a very vulnerable position right now and are most likely going to protect whatever they have, which is Mugabe. Without him, they don’t know where they stand.”

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