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Eric Bloch:Fact or Fiction

LAST week’s presentation to parliament by the acting Minister of Finance, Senator Chinamasa, of the 2009 National Budget Statement was remarkable and intriguing in one respect.

It was probably the first such Statement in the last 20 years which not only attempted to give genuine and credible recognition to prevailing economic circumstances, but did so with minimal attribution of culpability for Zimbabwean economic ills to mythical, malice driven actions of third parties. Instead, it sought to recognise economic realties, and to lay down some foundations for those realities to be addressed effectively.

Inevitably, there was reference to impacts of internationally imposed economic sanctions, but uncharacteristically it was very low key, and innumerable other negative factors were also recognised. 

Moreover, and in relation to almost all governmental statements in the recent past, most unusually, the Acting Minister actually paid tribute to the international community for humanitarian and other aid extended to Zimbabwe, and recorded thanks to diverse countries and organizations, including “the European Union, as well as Australia, Canada, China, Japan, the Republic  of Korea, Switzerland, the United States, among other countries”.

Abandoning the previously endless statements of denial of facts, the budget statement acknowledged many of the grievous economic circumstances prevailing in Zimbabwe.

In contrast to almost eight months of spurious contentions in 2008 that Zimbabwe was then enjoying “the mother of all agricultural seasons”, the Acting Minister stated that the agricultural sector had “poor performance”, and although mainly ascribing that performance to adverse climatic conditions, nevertheless conceded a range of other contributing factors.

This unusual display of realism, albeit muted in some respects, was emphasised by the statement’s identification of many key issues that need to be urgently addressed by government, and by pursuit of appropriate fiscal and other policies. These included:

* Re-engaging the international community for the necessary financial cooperation over economic reconstruction;

* Achieving political cohesion and unity of purposes;

* Primary focus upon inflation reduction, achieving food security and productivity in agriculture,  effective water management,  assured  fuel and  electricity supplies,  improved delivery of health  and education services,  transport infrastructural  rehabilitation, improved telecommunication, creation  of public enterprise efficiency, stimulation of the productive sectors, ensuring  skills retention, and much else.

However, as surprising transparent and factual as was most of the Acting Minister’s evaluation of the current dismal state of the Zimbabwean economy,  and of the necessary  transformation  objectives, the declared budgetary measures and targets,  and the stated intended  actions to achieve them, whether  or not  genuinely intended,  are unfortunately  very likely to prove to be  fictional.

First, and foremost,  and correctly   recognising “the need to contain inflation through  tightening  of our fiscal  and monetary policies”, government’s stated intent for 2009 is a balanced  budget, linking  expenditures  to actual  revenues. 

This is a very necessary and commendable objective, but after 29 years of unending profligacy, one must fear that government’s inability to contain expenditure is endemic and will continue in the year ahead.

This fear is reinforced by there being no declaration of intent to reduce the gargantuan public service in general, and the defence forces in particular, the intent that the about to be formed “inclusive government” is to have 31 ministers, over and above innumerable deputies, and the attendant infrastructures, there is no declared intent to consolidate the excessive number of embassies, consulates and missions that Zimbabwe has abroad, and the like.

The improbability of government succeeding in matching its revenues and expenditures is intensified by a probable overly-optimistic expectation of a 2% economic growth in 2009, with consequential fiscal revenue inflow projection.

It is too late for agriculture to contribute to this year’s projected economic growth, the mining sector’s productivity is presently reduced, mainly due to non-receipt of foreign currency earnings, the manufacturing sector’s productivity has declined from 75% of capacity in 2002 to a niggardly 10% at the present time, and all the other economic sectors are in similar decline.

Thus, even if the governmental intent of a “balanced budget” is genuine, which cannot be taken for granted, the reality is that it will probably prove to be fiction.

Similarly, scepticism is inevitable as to government’s statement that it will now deregulate and liberalise the economy. On the one hand it has very commendably, although excessively belatedly, determined to discontinue the economically destructive price control operations of the National Incomes and Pricing Commission (NIPC).

It has also, very correctly, decided to “dollarise” the economy, legitimising that which factually exists. But it is doing so via a Reserve Bank licensing system. 

So unnecessary regulation and control is to be applied to  the “dollarisation”, in blatant conflict  with the stated intention to bring about economic freedom, with the economy driven by market forces,  instead of continuing to be an excessively command economy. Thus, the so-called economic liberalisation will clearly be fiction, not fact.

Yet another inconsistency is the contention that government’s polices are targeted at restoring viability to manufacturing and other sectorial operations, and yet in the budget statement the Acting Minister announced new tariffs for electricity  supplies which are three to four times those applied elsewhere  in the region.

How on earth is Zimbabwean industry to achieve export market competitiveness and growth when it is burdened with such onerously great operational charges? That targeted industry recovery and growth will prove to be fiction, and not fact, by such unrealistic governmental pricing policies.

The acting Minister noted that agricultural sector recovery and performance is contingent upon adequate available financing of farmers. To this end he stated that the Reserve Bank “will be coordinating measures to restore and enhance the level of participation by our banks and   other financial institutions in lending to our farmers”.

But regrettably he was silent on how those banks and financial institutions will be protected with adequate security for debt repayment by farmers. For so long as farmers do not have title to their lands or, in the alternative, negotiability of their land leases,  most will have no collateral to give as funding security.

So the intended provision of working capital to the agricultural sector must be expected to be fiction, not fact.

The budget statement appears, therefore, to be a pronounced mix of fact and fiction. It factually recognised many Zimbabwean economic negatives, but to a dismally appalling extent, the declared intended process to reverse those negatives must be expected to prove to be fiction.


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