Facing tough macroeconomic challenges

Trade unions in Sao Tome e Principe argue that their demand for a sizeable increase in a minimum wage equivalent to less than US $6 a month is more than justified by the gap between salaries and cost of living. The government, however, says that agreeing to the demands put forward by the workers through the ‘Intersindical’, the trade union negotiating team, would disrupt efforts to maintain the macroeconomic stability it has managed to achieve over the past two years. The two sides held meetings in recent weeks but failed to reach agreement. On Tuesday, one day after their latest meeting, the unions notified the government that they intended to stage a general strike on 20 March. The minimum wage in the small Atlantic Ocean archipelago of some 140,000 people located about one hour by air from Gabon is 40,000 dobras, which is less than US $6 at the current rate of about 7500 dobras to the dollar. The unions originally wanted it increased to 600,000 dobras, Joao Tavares, spokesman of the Intersindical, told IRIN, but later reduced their demand to 350,000 (about US $48). This is way below the amount the average family needs to spend each month on basic household needs, which the unions have estimated at 800,000 dobras, according to Tavares. He said the bulk of the some 4,000 state workers earn less than a quarter of that amount. Average salaries in the public sector ranged between 120,000 to 150,000 dobras, according to the trade unionist. Most people only manage to make ends meet because they engage in vending and other informal-sector activity after work, have small farms or work as night guards, he said. The government proposes a minimum wage of 120,000 dobras. This, it says, is far more than the amount originally proposed by the International Monetary Fund (IMF) and World Bank during talks that have led to a preliminary agreement expected to pave the way for the country’s inclusion in the group of Highly Indebted Poor Countries (HIPC). HIPC status would qualify Sao Tome e Principe for assistance in dealing with an external debt which, according to Finance Minister Adelino Castelho David, amounted at the end of 1998 to US $270 million, over five times the country’s annual gross domestic product (GDP) of around US $50 million. Macroeconomic stability, Castelho David said, is crucial to the country’s future. The government decided to practice fiscal discipline because “we realised that we cannot develop Sao Tome and Principe if we do not resolve the debt problem”, he told IRIN. The inflation rate was reduced from 81 percent at the end of 1997 to about 20 percent at the end of 1998 and 12.6 percent at the end of 1999, he said. In 1997 the country registered a deficit in its primary budget (excluding debt payments) equivalent to 2 percent of GDP. This was transformed in 1998 into a surplus amounting to 0.7 percent of GDP and 1.3 percent in 1999, he said. In a communique issued on 25 February, the government stated that its negotiations with the IMF and World Bank also focused on public sector reforms, including a proposed to dismiss 401 state employees. The government was able to have the start of the dismissals postponed to 1 July to give it time to come up with a new organisational chart, decide which workers could be laid off, and find alternatives for the dismissed public servants. In the communique, the government said that were it to increase the minimum wage to more than 120,000 dobras, it “would have no credible alternative in the eyes of the donor community but to accompany (this) with a programme for the immediate dismissal of a total of 401 public servants”. Whether its position has changed since the strike notice from the workers was not immediately clear. A humanitarian source told IRIN on Thursday that the only reaction thus far to the strike threat had been a statement that the government would announce “in due course” the measures it intended to take. However, sources felt the government was unlikely to grant the workers’ demand when it has a hard time finding money to pay existing salaries, with many state employees still waiting to receive their wages for January and February.