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Eric Bloch Column

Finance minister emigrates to Cuckooland
By Eric Bloch

AS Zimbabwe listened to the very erudite delivery to parliament of the 2006 national budget statement last Thursday by Finance minister Dr Herbert Mur

erwa, the reaction of many must, in the early phases of that delivery, have been that the minister must be the latest victim of the very pronounced “brain drain”.

Although all will desperately hope that the 2006 economic outturn will be as foreseen in the budget statement, most — if not all — Zimbabweans are undoubtedly so highly-sceptical of that outturn being realised that they assume that the minister has emigrated to Cloud Cuckooland. The prospects of the projections becoming reality are remote in the extreme!

However, when the minister continued his statement and addressed revenue and expenditure issues, he demonstrated that he is not unaware of the prevailing economic environment, for he approached those issues with a very high degree of realism, and with very real concern for the widespread hardships confronting the majority of Zimbabweans.

Therefore, it must be assumed that the improbable economic projections were not because the minister is not in touch with the facts on the ground, but that he was obligated (possibly at risk of his ministerial post) to sing the governmental melodies of economic myth.

Ever since the president and his government set the economy upon its disastrous decline in late 1997, he and his ministers have consistently denied culpability, and have unwaveringly blamed others, whilst concurrently promising, year after year an economic turnaround.

Of course, the economic recovery did not materialise because, with equal consistency, government has not only continued to do that which has been diametrically opposite of the necessary for restoration of economic well-being, but has also continued to reject any blame for ongoing economic collapse.

According to government, the economic ills have been attributable to the acts of the United Kingdom in general, and Premier Tony Blair and Jack Straw in particular, the USA and President George Bush, the Commonwealth (with a few exceptions), white commercial farmers, white industrialists, the political opposition, and drought, to name but a few.

Destructive land reform implementation, profligate payouts to actual and so-called war veterans, gross governmental overspends, disregard for economic fundamentals, abuse of the principles of law and order, contempt for human rights, alienation of the international community, and the like, had nothing to do with the continuing economic collapse, according to government, and it persists in finding alternative, spurious targets of blame.

The first of the improbable 2006 expectations of government, as disclosed in the budget statement, was that agriculture is “expected to register a positive growth rate of 14,8%…on the back of the normal rain season, increased hectarage under irrigation, timely provision of critical inputs and the introduction of the targeted production programme to promote food security.”

The drivers of the growth are projected to be a 33% increase in maize production and a 26% increase in that of cotton. However, even if those production increases materialise, despite inadequate land preparation, and despite many farmers selling the fuel allocated to them into the black market, they will surely be offset by the very probable 30% decline in tobacco production. Moreover, general reports project no growth in the coming year in the production of sugar, tea, coffee, citrus, or within the dairy and beef sectors.

Mining is expected to grow by 27% in 2006, and this is a real possibility, if the world gold price continues at current levels in excess of US$500 per ounce, but only if the Reserve Bank allows market forces to drive exchange rates.

That is essential if the mining industry is to be enabled to meet ever-rising operational costs, the most pronounced being wage escalations (in view of ongoing hyperinflation), energy and imported spares and consumables. But, if the rate continues to be “managed”, instead of being market-force driven as prescribed by the governor of the Reserve Bank, Dr Gideon Gono, in his 2005 third quarter monetary policy statement, then the mining industry will not achieve the projected increases in output.

The minister also referred to own “anticipated increase in tourist arrivals”, suggesting that “the country’s continued track record of peace and tranquillity should also benefit tourism”.

Unfortunately, whilst that should be so, it does not correlate with the continuing farm invasions, harassment of farmers, and the savage and brutal murder of a farmer near Norton only five days prior to the budget statement, which vicious attack has not even been the subject of a condemnatory statement by government.

Whilst Vice-President Joseph Msika and Gono have repeatedly called for the cessation of farm invasions, discontinuance of molestation of white farmers, and an end to white farmer persecution, government has not shown any will or intent to ensure compliance. That does not emit a sense of “peace and tranquillity” as sought by tourists. It also is not conducive to investment stimulation.

On the issue of great concern to all, being the intense upward surge in inflation, after it was reduced by almost 500 percentage points during the 2004 and early 2005, the minister stated that the annual rate of inflation is targeted to decline to “around 80% by the end of 2006”.

This is similar to the Reserve Bank projection of a rate of between 50 and 80% by December 2006, but the minister disclosed that the projection is “premised on the expected normal rain season, complementary restrictive fiscal and monetary policies and significantly subdued parallel market activities”.

Although there are real prospects of a normal rain season, Zimbabwe will nevertheless have to resort to food imports in 2006. Even if the forecast of a 33% increase in maize production materialises, Zimbabwe will still have to import in excess of 800 000 tonnes of maize, and inevitably will also have to resort to wheat imports.

Such imports will either necessitate higher prices payable by the consumers, or massive subsidies by government. Either will be inflationary!

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