While some economists and the private sector are spelling out concerns on the growing wage bill arguing this may put a strain on the government ’s purse, investment and advisory firm Alliance Capital Limited has said the growing wage bill renders some positives to the economy.
The firm, in its weekly advisory this week, said there is a likelihood of an improvement in the demand side of the economy which may trigger consumption of products and ultimately improve the growth of businesses in the country.
“An increase in salaries means employees will now have more disposable income and they are likely to spend more into the economy particularly on products from the private sector. This will then lead to private sector growth,” reads the firm’s weekly report in part.
According to the 2018/19 National Budget, the expenditure outlay for the financial year has increased by 14 percent from K1.3 trillion to K1.5 trillion due to salary increases for some civil servants.
This increase is attributed to 10 and 20 percent salary adjustment for senior and junior grades in the civil service, respectively, and the doubling of honoraria to chiefs at every stage and planned recruitment of school teachers and medical personnel.
But the firm notes that since the increase is mainly on junior civil servants who reside mostly in semi-urban areas, some of their spending is likely to enhance the economic benefit of the local business people in those areas.
“This means those who sell tomatoes, bake scones for the local market, sell pounded groundnuts and raise local chickens will benefit, considering most of Malawi’s economy, as such there is high likelihood that it can happen,” the firm suggested.
Alliance Capital Limited has since said if there is going to be another civil service salary adjustment next year there will be need for a reconciliation of both arguments on wage bill while taking into consideration contextual realities.
Treasury spokesperson Davis Sado also said the adjustments in the budget due to salary increments should not cause any panic.
“What could constrain the national budget are unplanned programmes but we currently do not have any and are working to the keep things that way,” he said.