Cabinet yesterday launched a program to encourage civil servants to leave the government and enter the private sector or further their education.
Under the scheme, civil servants and government employees will be eligible for one of four retirement incentive packages: no assistance, a one time payment of Rf 150,000 (US$11,700), a payment of Rf 150,000 and priority in the small and medium enterprises loan scheme (for those 18-50 years of age), or a lump sum of Rf 200,000 (US$15,600) and priority in government training and scholarship programmes (for those 18-40 years of age).
In addition, government employees above the age of 55 who retire voluntarily will be given the same benefits as those released by the Civil Service Commission (CSC) at the mandatory retirement age of 65.
The deadline to apply for the program with the Ministry of Finance is May 31, 2011.
The move is likely to win the government further favour with the International Monetary Fund (IMF), following its managed float of the rufiya and passing of several tax bills through parliament, including the tourism goods and services tax (TGST) and business profit tax.
However international financial organisations such as the World bank and International Monetary Fund (IMF) have regarded the country’s bloated public wage bill as the key contributor to its 20-21 percent budget deficit, arguing that the country must reduce its expenditure as well as increase its revenue.
The deficit exploded on the back of a 400 percent increase in the government’s wage bill between 2004 and 2009, with tremendous growth between 2007 and 2009. On paper, the government increased average salaries from Rf3000 to Rf11,000 and boosted the size of the civil service from 24,000 to 32,000 people – 11 percent of the total population of the country – doubling government spending from 35 percent of GDP to 60 percent from 2004 to 2006.
Political maneuverings by the opposition last year forced the government to rescind pay cuts of 15 percent, leading the IMF to comment that “significant policy slippages” were threatening the country’s economic sustainability.
Several political skirmishes over pay cuts between the Finance Ministry and Civil Service Commission (CSC) ended in court last year, with permanent secretaries of Ministries at one stage submitting multiple wage forms in an effort to appease both sides.
Head of the CSC Mohamed Fahmy told Minivan News that the commission was “very positive” about the voluntary redundancy program.
“This is an opportunity particularly for young people to advance their studies and skills,” he suggested.
“We can’t yet say how people will react, but definitely the package for people 55 years and over is very good. I think this is positive encouragement – scholarships are hard to come by, and many parents are not in a position to fund their children’s education.”
The President’s Press Secretary Mohamed Zuhair claimed that the potential short term costs of the scheme “are not relatively high compared to the benefits in the long term.”
“We need to trim down the civil service to reduce state expenditure and have a healthier private sector,” he said. “Few other countries apart from North Korea employ such a high percentage of their population in government.”
Zuhair dismissed the possibility that such an incentive program would lead to a ministerial ‘brain drain’, as talented staff with prospects outside government rushed to leave the civil service.
“The civil service will continue to provide benefits such as long term security and upward mobility – I don’t think there will be a rush,” he predicted.
Political appointees would also be eligible for the program, he added, however following the replacement of government-appointed island councillors by elected representatives, “there are not more than about 170 appointees”.
In comparison, the Civil Service Commission (CSC) has 21,000 staff under its mandate, including 19,000 permanent staff and 2000 contractors.
The remaining public sector employers fall under an assortment of 100 percent government-owned corporations, particularly prevalent in the medical, education and media sectors, a loophole that allows the government to hire-and-fire staff without being subject to the jurisdiction of the CSC.
“Staff of the corporations are no longer civil servants but are still uniformed servants of the state,” Zuhair explained.
Yesterday’s move to incentivise the departure of civil servants is likely to draw further support from the IMF, which has finished its Article IV consultation and may be weighing up the provision of further support.