Zimbabwe has often been ranked among the most miserable countries in the world and one of the contributing factors is a comatose economy that has plunged a staggering 72% of the population into what the United Nations describes as “extreme poverty”.
Zimbabwe Independent Comment
If nothing is done to stem the bleeding and correct the nation’s debt trajectory, it means future generations of Zimbabweans will also pay a heavy price for the economic mismanagement, corruption and incompetence which have brought us to this sorry state of affairs.
The recently released Treasury Bulletin for the 4th quarter of 2016 is utterly alarming and goes a long way in explaining some of the reasons why the economy is in the intensive care.
Government expenditure amounted to US$1,432 billion against a target of US$1,006 billion. This means the authorities overspent by a mind-boggling 42,3%.
Revenues in that quarter totalled US$902,5 million. The budget deficit ballooned to US$529,5 million in that period. Such reckless spending is unsustainable, scandalous and unconscionable.
The expenditure overrun has transcended the realm of fiscal indiscipline and now borders on criminal irresponsibility. This is the inevitable conclusion, when you consider that the budget deficit is financed mainly through the issuance of Treasury Bills (TBs), which breached the US$2 billion at the end of 2016.
As a direct consequence of unrestrained spending, the government is crowding out the private sector. It is trite economics that a sharp rise in government spending has the effect of driving down or even eliminating private sector spending. The government has a track record for perennially defaulting on loans and yet the banks are continuing to lend to public institutions while credit to the private sector has shrunk.
Against all logic, we see the productive sectors of the economy being deprived of much-needed funding while large amounts of credit are advanced towards government expenditure.
Loss-making parastatals continue depleting the fiscus. When will the government stop throwing money down the drain?
What valuable services are being rendered to the struggling economy by moribund state-owned entities such as the National Railways of Zimbabwe and the National Handicraft Centre?
The privatisation of unhelpful parastatals is long overdue. Every year the government announces lofty plans to discard of state-owned enterprises but no practical action is ever taken in that regard.
According to the bulletin, domestic credit in 2016 increased by 15,3%, from US$5,53 billion in December 2015 to US$6,38 billion in December 2016. The increase was largely driven by a 61,9% upsurge in government credit, from US$1,56 billion in December 2015 to US$2,53 billion in December 2016.
“However, credit to private sector decreased by 4,8% from US$3,83 billion in December 2016 to US$3,65 billion in December 2015,” reads the bulletin. The growth in government credit at the expense of the private sector comes as companies have been forced to downsize or shut down, sending thousands of workers into untold poverty.
Fiscal discipline is not only a constitutional imperative—it is the right thing to do.