The Treasury has concurred with implementing the provisions of statutory instrument169/2021 on the public sector employees with effect from 1 January 2024, Section 8(b) (4) provides that, “Any person in Zimbabwe who earns remuneration in a currency other than that of Zimbabwe shall be required to pay his/her contributions in foreign currency and in cases where individuals earn a combination of foreign currency and Zimbabwean dollars, he/she shall pay the contribution in the same currency ratio.
According to a recent announcement by the government, starting this year, all public service workers who get compensation in foreign currencies must make their pension contributions in that same currency. Outstanding contributions should be staggered across three months. Civil servants in Zimbabwe are currently earning salaries in both United States dollars and Zimbabwe Gold and the new directive states that all civil servants will use the same ratio in making pension contributions. The move has been designed to stabilize the National Social Security Authority (NSSA) scheme.
The announcement is expected to have a negative impact on the public workers. Civil servants may worry about the long-term stability of the pension system given the country’s economic challenges. Civil servants will experience immediate financial strain while there is no guarantee on policy consistency to ensure payouts received by pensioners are reflective of contributions made during their working life. The United States dollar deductions will reduce the civil servants’ disposable income.
The government has gazette a directive that the old USD 300 Covid-19 allowances should now be paid as part of employees' pensionable salaries. The Government introduced a USD75 COVID-19 allowance in 2020 and has progressively increased it to USD300, but since it was an allowance, it was exempted from being taxed.
Many civil servants are getting paid at most forty percent (40%) of the total USD component as cash (Nostro) and the remainder paid in ZiG at the prevailing RBZ auction rate. Now that the new directive is now also chasing that few USD component and also considering that the most people are using foreign currency to cover for rent, fuel, transport, school fees and medical expenses this can potentially lead to financial stress. Redirecting a portion of their limited USD income to pension contributions might cause financial difficulties in short term.
In conclusion this recent announcement will result in civil servant being stretched to meeting the USD Obligations since other commodities in the country are still charged in USD. The government must increase the salaries for the civil servants so that they can at least have enough to cater for the basics even after paying the subscriptions.