Comment: No Silver Bullet to Revive Economy

THE coast is not yet clear for the unity government in as far as mending the economy is concerned.


The revised budget by Finance minister Tendai Biti on Wednesday is a forlorn admission that the unity government does not possess the silver bullet to put this economy back on the rails.

The government has come up with a new economic blueprint called the Short Term Emergency Recovery Programme to get Zimbabwe working again. This is a comprehensive and all-encompassing programme which requires US$5 billion in funding. That money is not there now. There is actually very little money to fund government activities this year.
Biti this week slashed the budget expenditure proposals to US$1 billion from the US$1,9 billion announced by then acting Finance minister Patrick Chinamasa in January. Biti admits that the money is just not there to run government’s activities. Revenue from traditional sources, mainly income tax and corporate tax, have dried up due to dollarisation as companies have either devised ways of evading tax or cannot pay altogether.
The US$900 million excised from the budget is still badly required to revive comatose social services. But the cavalry of donors with bags of cash will not be heading this way any time soon. Recovery will be slow and painful.
Government has now been forced to operate a cash budget, meaning it has to learn to live within its means, a big ask from a civil service bred on profligacy and corruption. But with a tiny budget to work with, his options as Finance minister are not just limited. He will soon find himself stuck in a quagmire in which he is expected to lead the country’s economic recovery and at the same time perform the delicate act of dicing the small cake to a government expanded this year to accommodate political interests under the unity government  
“What we gather is what we eat,” is now Biti’s new rallying call for his colleagues in government. There are many gatherers on the ground at the moment but the pickings are too few. Biti admits that there is a huge task to hand.
“Thus, if one is not careful, one is reduced to focusing on fire fighting issues in the allocation of meagre resources,” said Biti. “One can easily lose focus on the bigger developmental role of fiscal policy.”
The paucity of the budget is also worrying because the public purse is not holding enough funds to stimulate economic activity which should result in improved capacity utilisation and job creation, and with it greater revenues to the fiscus. The government has at the moment no capacity to commit any resources to public sector investment. The government cannot complete stalled capital projects like the Tokwe-Mukosi dam in the Lowveld or the Mtshabezi dam project in Matabeleland North. The dualisation of the Bulawayo and Beitbridge roads will move at glacial speed due to paltry allocations. The government cannot launch public works although there is a whole minister running that portfolio. In this fiscal year Theresa Makone, in charge of Public Works, has to make do with US$12 million most of which will be spent on administrative issues.
The classification of the national budget shows that government intends to spend almost 64% of the estimates on running its activities, salaries and pensions. Only 19% is being set aside for capital expenditure while the rest is earmarked for state grants. In the absence of financial sector lending, the government is expected to provide funding to the agricultural sector and to manufacturers. That money is not there either.
This is the danger stalking the unity government. Firstly, it was built on a shaky foundation of general mistrust and divergent views. But it gained strength on the back of the public’s belief that it will end hunger and also deliver in fundamental areas of education, health and mitigating unemployment through reviving agriculture, mining and the manufacturing sectors. On the day of his inauguration, Prime Minister Morgan Tsvangirai made brave promises to the civil service and uniformed forces that they would be paid in foreign currency. There is huge expectation which the unity government should meet.
A peek into the government books shows that there is not much to fulfill the promises of better remuneration for government workers. Biti admits that the government only collected US$25 million last month and has so far collected US$30 million this month. Civil servants should therefore not expect a sea change in their salaries this month. Therein lies another problem for the unity government. It will soon be called to deal with a crisis of expectation and answer difficult questions from hungry civil servants and malnourished children.
As Biti rightly points out, the government could soon be reduced to focusing on firefighting and managing the crisis of expectation. There is all the evidence that this country is badly in need of balance of payments support. But with farm seizures, debt arrears and a bloated government the IMF is not about to put its hand in its pocket until it sees new facts on the ground.