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Strong growth in civil service hiring was associated with 10% decline in productivity (IMF Report)

“The increase in civil service hiring and the excessively high salaries have been followed by a 10% decline in the sector’s productivity between 2010 and 2015,” said a report recently prepared by the International Monetary Fund (IMF) on the Public Wage Bills in the Middle East and Central Asia.

“This has had negative spillovers to the private sector, especially as graduates tend to continue to prefer a career in the civil service over a job in the private sector,” the report pointed out.

On Tunisia, the report estimates that “the increase in the wage bill since 2011 is the main cause of the public finance crisis in the country”. It recalled that the wage bill reached 14.1% of GDP in 2016, against 10% in 2010.

“The payroll of the public service as a percentage of GDP is among the highest in the world,” the report also said.

It also recalled that “successive governments have used recruitments in the public sector as a means of distributing wealth and securing political support”.

The wage bill represents 14.4% of GDP, accounting for two-thirds of tax revenues and nearly half of total government spending, the report indicated.

It explains this increase by the massive hiring made in recent years (since 2011/2014). The number of civil servants increased from 430 thousand to 590 thousand, i.e. an increase of about 35%.

According to the authors of the report, the second cause of the rise in the wage bill is the real increase in wages during the 2015/2016 period after the signing of the agreements on wage increases with the Tunisian General Labor Union (UGTT), the most recent of which covers the period 2016/2018.

This situation also caused an increase in average public service salaries by 12% in 2016, about 7 percentage points above the average inflation rate.

The report also mentions the programmes set up by the Tunisian government aimed at reforming the administration and the civil service, in addition to bringing the wage bill down to around 12% of GDP by 2020, besides channeling freed-up resources to priority public investments.

The same document explains that the government’s strategy for civil service reform aims to control wages by linking wage increases to growth rate, hiring control, in addition to granting compensation package for official willing to leave the civil service (25 thousand officials). These steps will reduce the payroll bill by nearly 0.4% of GDP, the report said.

The Tunisian government’s strategy also aims to reform the administration, through functional reviews of the main ministries that will systematically identify areas for efficiency gains. A dashboard, fed by a modern information technology system, will monitor the allocation of human resources across ministries and functions.

The Tunisian economy is currently facing a high unemployment rate and a slowdown in job creation opportunities, in addition to social pressures, said the report which proposes various options for reform.

These include improving the quality of administrative services and increasing public investment that can help promote private sector growth and create jobs.

TAP

 

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