Finance minister Patrick Chinamasa’s US$4,1 billion 2017 National Budget has many deficiencies but two prominent ones have stuck out like a sore thumb: the celebration of mediocrity and the government’s stark refusal to live within its means.
Comment: The Zimbabwe Independent Editor
Once upon a time, Zimbabwe was an economic powerhouse in this part of Africa. Today, we are the problem child of an entire continent.
If we agree that a national budget is the single most important policy document of any government, we must also appreciate the need to subject the 2017 budget to meticulous scrutiny.
The size of the national budget should worry everyone. It has shrunk and stagnated since 2013, proving that the ZimAsset economic blueprint is a hollow political wish list with nothing useful to offer the long-suffering people of Zimbabwe.
Let’s put the size of the budget into proper perspective. Shoprite, a South African supermarket chain, posted a turnover of R130 billion in the year ending June 2016. This means Zimbabwe’s 2017 budget is less than half the turnover of a group of retail shops. In the circumstances, should we really be surprised that the South African company made a strategic decision to withdraw from Zimbabwe?
The underwhelming size of the budget is not the only headache. Government’s profligate spending, the refusal to live within its means, has become a major source of economic turmoil.
This failure to abide by the basic tenets of fiscal prudence is even reflected in the 2017 budget’s total projected revenue figure of US$3,7 billion. How on earth will the government finance the US$400 million deficit? It is trite economics that a government which budgets for failure cannot inspire confidence.
The government lacks fiscal discipline. There is no demonstrable willingness to maintain smooth financial system operations or uphold long-term fiscal health and stability.
Government domestic debt — which stood at US$3,7 billion as at October 2016 — is clearly unsustainable. In a normal economy, Treasury Bills (TBs) are a useful short-term instrument for raising funds via open market operations. But in Zimbabwe’s case, TBs have not been deployed prudently. In fact, TBs are a ticking time bomb. Long before bond notes spooked the market, the authorities were churning out TBs which, to all intents and purposes, were effectively a local currency by another name.
TBs constitute a major component of government domestic debt. Taking into consideration the high likelihood of default upon maturity by the broke government, the commercial paper is posing significant systemic risk to banks and the entire financial sector.
President Robert Mugabe’s government knows the solution to all this: far-reaching reforms. Predictably, there is a stubborn reluctance to ring in the changes. The political will is simply not there— that is why the Zimbabwean crisis is essentially centred on leadership failure. But Mugabe must be told that the pressing need for austerity is no longer a dismissible opposition slogan, but a strategic imperative for national survival.