FINANCE minister Mthuli Ncube yesterday presented the 2019 National Budget, which he themed “Austerity for Prosperity”, but the jury is still out as to whether he has done enough to lay the necessary groundwork for cutting the fiscal deficit and containing recurrent expenditure.
The budget deficit increased 7,1% to US$2,7 billion (10,9% of gross domestic product) in the nine months to September 30. It is projected to surge to US$2,9 billion by year-end. These figures show that the government is living beyond its means.
In his statement to the National Assembly, the minister spelt out his priorities as: targeting fiscal and current account deficits. These have been a major source of economic turmoil. His promise to do the right thing must be taken very seriously. A national budget, after all, is the most important public policy instrument of any government.
“The primary objective of the 2019 budget is to stabilise the economy by targeting the fiscal and current account twin deficits which have become major sources of overall economic vulnerabilities including inflation, sharp rise in indebtedness, accumulation of arrears and foreign currency shortages,” Ncube said.
He invoked the British philosopher John Stuart Mill on the importance of suppressing one’s immediate desires in return for future progress. For good measure, Ncube even quoted the German thinker Immanuel Kant: “We are not rich by what we possess, but by what we can do without.” He also threw American management consultant Peter Drucker: “Nothing is less productive than to make more efficient what should not be done at all …”
The 2019 budget is certainly not all doom and gloom, of course. In a refreshing development, 31% of the proposed budget has been allocated to capital expenditure, a commendable decision.
Government has relied on the Reserve Bank of Zimbabwe overdraft facility, which increased at US$1,1 billion, which is way above the statutory limit. Likewise, Treasury Bills (TBs) have been issued in a reckless and irresponsible manner. In 2019 alone, TB maturities are projected at US$2,2 billion — a figure described by the Finance minister as “unsustainable in one year”. Treasury is hoping to whittle down the fiscal deficit in a phased manner. The deficit is currently equivalent to 11,7% of gross domestic product.
In 2019, the deficit should be reduced to 5% of GDP, then 4,1% in 2020 and 2,9% in 2021. Should these targets be met, Zimbabwe’s budget deficit will comply with the Southern African Development Community threshold of 3% of GDP.
Slashing the salaries of ministers and senior bureaucrats by 5% with effect from January 2019, though commendable, is more of a symbolic gesture. It will ring hollow if it is not accompanied by significant reform in the government’s spending patterns, particularly the bloated allowances, unnecessary foreign travel and wasteful allocation of fuel, over and above dealing with civil service reforms, overdrafts, TBs, subsidies and general waste. What the 2019 budget has done is increase the tax burden on the ordinary citizen. The success or failure of the 2019 budget will depend on whether the government walks the talk or not. The jury is still out on the budget.