Murerwa stands little chance with budget
WHAT is the point of a
budget if it lacks political authority; if it is not a statement of how the government intends to proceed during the fiscal year ahead?
The story of all budgets in recent years is that they reflect the good intentions of the Minister of Finance and his officials but are not supported by President Mugabe and his followers because they impede populist spending.
The most obvious example was Mugabe’s decision in 1997 to award war veterans over $4 billion in pensions and gratuities without first considering where the funds were to come from. The dispatch of troops to the DRC the following year delivered a second blow to both fiscal planning and the fiscus itself. Since then the economy has been in free fall.
Herbert Murerwa has an unenviable task on Thursday. He must produce a budget that every economic commentator knows will be sabotaged by his own party within days of its appearance. It will carry the authority only of the minister himself and a handful of his colleagues who understand that government must rein in its spending. But Mugabe’s inner circle who regard the fiscus as their party’s piggy bank have no intention of curbing their profligate habits. They need to spend in order to deliver. And making difficult decisions for the good of the nation has never been their strong point.
“Government can never go broke,” Mugabe declared not so long ago. “If it is broke then it will come to you and demand higher tax. Have you ever heard of a country that has collapsed because of borrowings?”
We are now paying the price of such a delinquent outlook. The numbers have never looked so bad. Domestic debt stands at $600 billion and external debt at US$1,3 billion. In his August supplementary budget Murerwa promised to hold the budget deficit at around 7,3% of GDP. But as government has already exhausted the votes approved in August, the pattern of borrowing will see that figure quickly eclipsed as the deficit balloons. Borrowing in turn fuels inflation which stands officially at 455,5% but in reality is headed into four digits.
GDP has shrunk by more than a third since 1999 so the resources at the disposal of the minister have likewise diminished. All this at a time when the UN calculates 75% of the nation lives below the poverty line of a US dollar a day.
Savings which constituted some 20% of GDP in the mid-90s have fallen to under 10%. There is therefore little basis for domestic investment.
What the minister needs to do — and this is accepted by all — is to get the macro-economic fundamentals straight. In particular he should propose specific measures to bring down inflation. And he can only do that by curbing borrowing.
Stimulating exports will help boost forex supplies. But that requires a regime friendly to exporters and their needs, not one intent upon scapegoating them for government’s policy failures.
The reason forex is in short supply is very simple: Zimbabwe is no longer able to export forex-rich items such as tobacco and horticultural products because producers have been expropriated. At the same time tourists will not come here so long as lawlessness and human rights abuses prevail.
However we look at it, Murerwa really doesn’t stand much of a chance in turning things around so long as the Zanu PF last-ditchers preside over the fate of his proposals. They signalled their position clearly enough last weekend when the Office of the President attacked the National Economic Consultative Forum for convening a dialogue session in the president’s name. It also attacked this newspaper for claiming that Mugabe had snubbed the session.
Whatever the excuse, the fact is Mugabe shows no willingness to cooperate with the country’s flagship smart partnership vehicle. He is going for scorched earth solutions which will cause further damage to the disintegrating fabric of the economy.
Murerwa clearly knows what is needed. But he has been wasting his time. There is no political will at the top to solve the myriad problems the country faces. Only a desire to apportion blame elsewhere and punish perceived enemies.
We would love to be proved wrong in our prediction of the fate of Murerwa’s budget. But what is the record to date?