"Pay hikes for war vets and traditional chiefs could slow down economy"

The Zimbabwean government's decision to award a large increase in pension payouts to former liberation war activists from this month is expected to have long-term repercussions, economists told IRIN. The minister of public service, labour and social welfare, Paul Mangwana, announced last week that former nationalists who had been detained by the colonial government would receive a hike of more than 1,000 percent in their state pensions as a once-off payment. Gideon Gono, governor of the Reserve Bank of Zimbabwe (RBZ), warned the government last year that such a large payout would throw plans to reduce inflation off course. Compensation under the Ex-Political Prisoners, Detainees and Restrictees Act, awarded to thousands of people who were detained, restricted or imprisoned by the colonial government, will reportedly run into trillions of Zimbabwean dollars. The independent Standard newspaper said the once-off payments would be worth Zim $10 million (about US $1,654) each, amounting to Zim $60 billion (US $9.9 million). There are reports that former detainees who did not register with the veterans association are now scrambling to do so, which could push the number of beneficiaries to 25,000, raising the bill to US $41 million. Last week the government also reportedly raised the allowances and salaries of headmen and village heads by 150 percent, with effect from January. Most of the former liberation soldiers have remained loyal to the ruling ZANU-PF, while village chiefs have been important to the party's strength in the countryside. Economist and member of the RBZ's advisory board, Eric Bloch, said the payouts made more political than economic sense. "That is blatantly an act of vote buying ahead of elections in March, and that will have a negative impact on the government's deficit, as it will have to resort to more borrowing. The decision will counteract the bank's efforts to fight inflation," Bloch told IRIN in an interview. In 1997, the government made an even larger payout to war veterans after they protested their living conditions - a move that had disastrous consequences for the economy. Tendai Biti, secretary for economic affairs of the opposition Movement for Democratic Change, claimed, "The doling out of millions of dollars for purposes of political survival is an indication of how insensitive the ruling party is. It does not matter to them if the economy is affected by their ill-advised decisions. All they care about is remaining in power."