Murerwa’s budget: full of sound and fury ?

Ngoni Chanakira


FINANCE minister Herbert Murerwa’s 2004 budget ha

s finally been presented to parliament and is now “history”, at least as far as its targets are concerned.


Murerwa said the total budget stood at $7,75 trillion with constitutional and statutory appropriations accounting for $1,33 trillion.


Commentators have either praised the budget for trying to stabilise the nation’s crisis-torn economy or dismissed it as a populist non-event that leaves much of the donkey work to new Reserve Bank governor Gideon Gono.


Analysts point out that Murerwa tried to do the usual balancing act to please all and sundry at a time when government is in a fix and the economy a bottomless pit.


Despite advice from all sectors, government has failed to control soaring inflation, mend its relationship with the international community, stop spending money it doesn’t have, and boost exports by giving exporters better incentives.


From 600% next month, inflation was likely to head up to 700% in the first quarter of next year, the minister said.


Murerwa admitted that inflation is the “worst enemy” facing Zimbabwe’s economy and that overspending must stop. How this would be achieved however was not evident in his statement last week.


Analysts however contend that this is the major problem currently facing Zimbabwe because officials simply promise things without spelling out exactly how they are to be achieved.


What Murerwa promised in many instances is not new but a rehashed version of excuses made in budgets presented before him by his predecessors.


Confederation of Zimbabwe Industries (CZI) president and Dairibord Zimbabwe chief executive officer Antony Mandiwanza summed up the mood at a post-budget breakfast meeting last Friday when he said the 2004 budget was a “suspense statement”.


“This, ladies and gentlemen, is a suspense statement,” Mandiwanza said. “It has good policy pronouncements but we need more detail. Without specific fiscal policies and a monetary statement we run the risk of triggering speculation.”


Murerwa did not provide concrete detail about the monetary policy, preferring to pass the task to Gono.


The minister did not even bother to accompany his statement with the estimates of expenditure — the blue book, although this shortcoming can probably be attributed to the Government Printers rather than the minister’s office!


“Government will pursue an interest rate policy which will encourage growth on one hand while fighting inflation on the other through discouraging speculative and consumptive borrowing,” Murerwa said. “The details will be announced in the monetary policy statement to be issued by the governor of the Reserve Bank of Zimbabwe by mid-December 2003.”


In three weeks therefore Gono is expected to perform miracles. The former Jewel Bank chief is expected to transform an economy that is in the intensive care unit to one that is not only thriving but also vibrant.


The Zimbabwean economy has deteriorated progressively over the past four years.


Real output has dropped by one third, inflation has reached 525,8% for October and social conditions are deteriorating.


The country’s balance of payments has been under severe pressure since 1999, when Zimbabwe began to accumulate payment arrears.


There is little productive investment in the economy and there are reports of significant capital flight and emigration of skilled labour.


The International Monetary Fund (IMF), which Zimbabwe loves to hate, says the economic crisis reflects to a large extent inappropriate economic policies.


The IMF said these shortcomings include loose fiscal and monetary policies, the maintenance of a fixed exchange rate in an environment of rising inflation and administrative controls.


“Increased regulations and government intervention have driven economic activity underground and contributed to the chronic shortages of goods and foreign exchange,” the IMF said.


“The impact of these policies has been exacerbated by the fast-track land reform programme, recurring droughts, and the HIV/Aids pandemic. Meanwhile investor confidence has been eroded by concerns over political developments, weak governance and corruption, problems related to the implementation of the government’s land reform programme, the push for an increased indigenisation of the business sector, and the selective enforcement of regulations.”


Murerwa painted an even gloomier picture.


The minister said the economy was estimated to contract by 13,2% this year and inflation to peak at about 600% by December before going up again to 700% during the first quarter of 2004.


Analysts said like other budgets before it, government had missed virtually all targets.


They said the need for supplementary budgets — this year amounting to $672 billion in August — showed government could not stick to its promises of controlling expenditure.


They said Zimbabwe needed to restore confidence by reducing uncertainties associated with any particular risk if the budget was to be taken seriously.


“We have become a risky investment destination which affects the tourism business,” Zimsun chief executive officer Shingi Munyeza said.


Others said the country needed to observe and protect property rights that were being abused by farm invaders in broad daylight.


“They (property rights) form one of the central pillars of private enterprise development,” a Zimbabwe National Chamber of Commerce economist said. “They also ensure security of tenure and investment in the eyes of both domestic and foreign investors.”


Analysts said the problems not addressed in the previous budget would simply spill over into 2004 although with greater intensity this time around.


They said the 2004 budget did not focus on how inflation would be contained or how foreign currency would be generated — agriculture, manufacturing and mining were all declining.


They said because there was no monetary policy, targets had already been missed by some agriculture sectors such as tobacco.The analysts said job creation was being “talked about” but in reality companies were closing down.


Murerwa, while not saying how, promised to eliminate corruption in both the public and private sectors.


Analysts question why the defence and security portfolio was given the third highest vote of $1,27 trillion when there was regional peace and social services were deteriorating.


At the breakfast meeting the minister defended the defence vote, saying: “There is no telling what will happen in the country.”


Economist John Robertson in a paper presented at a recent labour relations seminar said if Zimbabwe is to experience better rates of economic growth in the coming years investment spending would have to lead the way.


“This immediately highlights the need for lower inflation, moderate interest rates and conditions that will help stabilise the exchange rate,” Robertson said.


“The exacting standards of good fiscal management and good economic planning will have to take over completely from the slap-dash policies of government-sanctioned looting and pillaging that we have seen in the last five or six years.