Slash civil service, trim spending - IMF

MBONGENI MGUNI
Staff Writer | Tuesday September 14, 2010 00:00

Released last week, the detailed report follows a visit to Botswana of the IMF's Executive Board between June 1 and 14, 2010 during which the team met with senior finance ministry and Bank of Botswana officials.

Describing Botswana's civil service as 'among the largest in Africa', the IMF says its size was weighing down the economy and stunting the development of the private sector. 'The public sector outbids the private sector for available labour, exerting upward pressure on economy-wide labour costs and contributes to high unit labour costs and unemployment.

'While government workers constitute 40 percent of the total formal workforce, they claim more than 54 percent of total wages paid. The reservation wage that workers demand before accepting employment has risen as workers expect salaries significantly higher than the market clearing levels in the non-government sectors of the economy,' the IMF says.

Statistics provided by the Bretton Woods institution indicate that Botswana has a higher wage bill than Lebanon, Malaysia, Mauritius, Chile, Gabon and Costa Rica. Presently, Botswana has approximately 125, 000 local and central government workers.

The IMF also questioned continuing high investment in education and social safety nets where returns from this investment were unclear. 'Botswana allocates nearly a quarter of its annual public spending to education and spending per student is significantly higher than in other middle-income countries,' it says.

'High rates of literacy and enrolment in secondary schools have been among the system's accomplishments. However, less than 60 percent of those enrolling in secondary schools complete their schooling.

'Other measures of educational attainment are also no better than average, compared with other countries in the region, despite higher spending. Costs are also increasing, as measured by the high and rising implicit price deflator for education services.'

The report also pours criticism on social spending, saying social safety nets are another area where value for money appears weak. 'Social safety net programmes account for about 10 percent of government spending, or three to four percent of GDP, and are designed to address risks related to malnutrition, HIV/AIDS, unemployment, disability and old age.

'However, they cover only a portion of the poor (19 percent) and many beneficiaries are non-poor households (57 percent).

Better and more regular information (for example, poverty assessments and household income and expenditure surveys) is needed to improve targeting of beneficiaries.'

The IMF's recommendations are in line with a member agreement under which it holds consultations on economic performance and projections annually.

A similar consultative mission last year commended the government for prudent macroeconomic management policies but warned against increases in public spending.