“I HAVE learned to seek my happiness by limiting my desires, rather than in attempting to satisfy them,” — Finance minister Mthuli Ncube presenting his maiden budget statement in parliament in Harare yesterday.
Editor’s Memo,Dumisani Muleya
He was, of course, quoting famous British philosopher and political economist John Stuart Mill, simply trying to tell in a different yet sophisticated way the profligate Zimbabwean government to live within its means to avoid drowning in unsustainable fiscal deficits and debts, while also justifying his austerity measures.
That President Ememrosn Mnangagwa’s Zanu PF administration — which in many respects still resembles former president Robert Mugabe’s failed regime despite desperate efforts to draw a line in the sand and start afresh — had hitherto persisted with wasteful expenditures; funding a vast patronage network, buying luxury cars and mansions for corrupt and incompetent officials mainly ministers and inept state enterprises chief executives, overseas trips sometimes opportunistically used as shopping and holidays escapades, allowances and other freebies, is clear. Old habits die hard.
However, if no timely intervention was made the regime was almost certainly bound to drown in budget overruns, debts and arrears. Already it is running on empty, while some of its officials continue to live in cloud cuckoo land.
Anyone who believes the Zimbabwean economy is doing well, as Mnangagwa and some of his gullible blind followers seem to, is clearly living in a state of absurdly over-optimistic fantasy.
Figures and facts speak for themselves.
Government’s huge budget deficit surged 7,1% to US$2,7 billion in the nine months to September 30, 2018 compared to US$2,52 billion last year driven by unbudgeted expenditures. It is set to scale US$2,9 billion by year-end.
Ncube said the 2018 budget deficit is projected to rise to US$2,86 billion, representing 11,7% of GDP, against a target of US$793 million.
“Revenue collections for the nine months to September 2018 amounted to US$3,8 billion, against a target of US$3,4 billion, and by year-end, collections of US$5,5 billion are anticipated,” he said.
“On the other hand, total expenditures during the same period stood at US$6,5 billion, against a target of US$4,1 billion. Accordingly, expenditure outturn to year end is estimated at US$8,2 billion against a budget of US$5,3 billion, implying an expenditure overrun of US$2,8 billion. The 2018 budget deficit is projected at US$2,86 billion (11,7% of GDP), against a target of US$793 million.”
The large cumulative deficit was on account of unbudgeted expenditures relating to employment costs, support to agriculture, as well as some capital expenditure and net lending items.
Stuck at the heart of the current fiscal imbalances, the deficit has had destabilising implications, not only to the financial sector but also to the rest of the economy.
Financing of the deficit has mainly been through domestic borrowing via Treasury Bills (TBs), RBZ overdraft facility and cash advances, arrears and loans from the private sector.
The deficit has fuelled expansion of the domestic debt and pushed the total national debt overhang to US$17,69 billion.
The overdraft window increased by US$1,1 billion for the period January to September 2018, and is projected to close the year at US$2,5 billion, which is well above the stipulated statutory limit.
Government has been recklessly issuing TBs and bonds for the financing of the budget deficit, capitalisation of public entities, payment for legacy government debt, as well as funding state programmes, including command agriculture and subsidies.
To stanch the economic haemorrhage, Ncube came up with a series of austerity measures to tackle fiscal disequilibrium, which include dealing with TBs, overdraft facility, salary cuts, downsizing the civil service and many other cost containment measures.
While he has been inconsistent in his measures, particularly on currency reform issues, due to political and public pressure, Ncube has a clear idea of what needs to be done and how it should be done. But the real battle still lies ahead.
Inde lendlela (long road ahead) …