THE most important message, among other key issues, which came out of the International Monetary Fund (IMF) mission’s visit to Harare from September 17 to October 1 to assess the state of the economy was that government must learn to live within its means.
The IMF told truth to power.
Central to this issue is the demand for government to rationalise its bloated civil service and reduce an unsustainable wage bill, while balancing the primary fiscal budget.
Part of the problem is that government recklessly squanders taxpayers’ money on luxuries like top-of-range ministerial cars, office furniture and equipment, while funding endless unproductive overseas trips.
How does a serious government continue buying exclusive vehicles and dishing out money on patronage projects like increasing traditional chiefs’ paychecks when it’s facing such a fiscal crisis?
The IMF mission, led by Domenico Fanizza, told government to stop spending money it does not have. Of the US$3 billion import bill in the first half of the year, most of it was on duty-free government imports, highlighting costly consumption by authorities who seem oblivious to the economic environment in which they live.
The IMF said balancing the budget was important for Zimbabwe to move forward.
“This will send a strong signal that Zimbabwe’s government intends to live within its means. Moreover, fiscal policy will focus on raising the efficiency and quality of public spending and rebalancing the expenditure mix toward infrastructure and social outlays,” it said.
“Scarce public resources need to be used appropriately, underscoring the importance of containing pressures on the wage bill, stepping up reforms in the taxation of the mining sector, amending the Public Finance Management and Procurement Acts and approving the Public Debt Management Bill.”
Government is under pressure to reduce its bloated 236 000-strong workforce, which chews US$248 million a month or 76% of revenues, to contain a runaway wage bill which is crowding out capital and social outlays.
A balanced budget, which basically refers to one in which revenues and expenditures are more or less equal, meaning there is neither a budget surplus nor deficit, is crucial. It is closely related to cyclically balanced budget that is not necessarily balanced year-to-year, but balanced over an economic cycle.
Informed economists say a balanced budget decreases interest rates, helps savings and investment, while shrinking trade deficits and stimulating faster economic growth over a longer period of time.
So it is quite clear that government needs to balance its books.
After dumping cash-budgeting, government has inevitably run into financial trouble and predictably Finance minister Patrick Chinamasa is now increasing taxes and pushing a US$950 million supplementary budget to plug expenditure holes.
Chinamasa and his colleagues must understand that living within your means is more than just balancing your budget; it means being aware of the difference between what one needs and what one wants.
As Calvin Coolidge said, “there is no dignity quite so impressive, and no one independence quite so important, as living within your means”. This applies equally to governments and all of us as individuals.