'Salary hikes won’t spark high inflation!' - Economist

The recent 10 percent salary hikes announced by President Mokgweetsi Masisi for civil servants, including disciplined forces, will not be inflationary.

Since the announcement, fears have risen that the move, which comes into effect on the 1st of April, could spark a sudden increase in commodity prices.

However, speaking to Voice Money this week, a local economist, Moatlhodi Sebabole allayed fears that prices on goods and services were set to balloon.

Sebabole explained this is the first major adjustment of salaries in a decade and comes at a time when workers’ disposable income is at an all time low.

He further revealed this is the first salary alteration that is above inflation.

Despite this, Sebabole feels the modification is not enough to create demand uptake, further explaining he does not foresee much change to the current status quo.

“The increase is not going to make people rich but will certainly give them breathing space,” predicted Sebabole, adding he assumes workers will use this disposable income to either pay off their debts or to acquire more credit.

The economist believes the adjustment has come at an ideal time, following the countless hikes in fuel prices and utilities experienced in the country.

In recent years, Sebabole says people have literally been living from hand to mouth, with little or no disposable income to cater for anything other than the basics.

In his view, the salary adjustments for civil servants is a positive move by the government looking at the above factors and the fact that Botswana has one of the lowest wage bases when compared with its peers.

Sebabole insists it is high time the country’s wealth reflects on its citizens, noting that over the years this growth has not been felt by the pockets of most Batswana.

“We are a diamond producing country with a high per-capita income, but a lot of people earn way, way less!” he stressed.

Despite government announcing a budget deficit for the 2019/2020 financial year, Sebabole says the government can still afford to finance the salary adjustments through either issuing of bonds or raising of the tax base.