FINANCE minister Mthuli Ncube yesterday presented a highly ambitious 2020 National Budget spelling out many useful areas of focus but, as always, the question on everyone’s lips is whether the government possesses the required reformist rigour and discipline to walk the talk.
Economic reforms and austerity measures being spearheaded by the government under the Transitional Stabilisation Programme (TSP) have gone off the rails.
TSP targets have been largely missed. The IMF’s Staff-Monitored Programme is essentially the TSP abridged. By missing the targets, the government is doing a disservice to the reform agenda—a raft of measures meant to help extricate Zimbabwe from the mire of despair.
It emerges the central bank created ZW$3,2 billion in reserve money and Treasury spent ZW$8,2 billion in unbudgeted expenditure in the 2019 fiscal year.
The revelations are contained in Ncube’s 2020 fiscal policy statement presented yesterday. The 2020 budget is valued at ZW$63,8 billion (US$4,1 billion at the interbank rate and much lower at the black market rate of US$1:ZW$20).
One of the consequences of failing to stick to the reform agenda is that the government will find it increasingly difficult to craft a debt clearance plan.
As matters stand, a debt clearance deal with international financial institutions is not feasible in the near term. The long and short of it is that the prospects of securing new international lines of credit are diminishing. Zimbabwe will continue being seen as a high-risk economy.
We cannot downplay the significance of the TSP reform template.
The TSP was launched on October 5 2018 after last year’s general elections as part of President Emmerson Mnangagwa’s reform agenda.
The programme’s objective was to leverage on the country’s core competencies in natural resources (among other resources) to rebuild and transform Zimbabwe into an upper middle-income economy by 2030.
He said unbudgeted expenditures in the current fiscal year had contributed to government’s failure to meet the TSP targets.
“In 2019, spending outside the budget and macro-economic shocks disrupted attainment of the TSP targets,” he said.
“Refraining from unbudgeted activities and borrowing from the central bank will, therefore, constitute a key obligation for both Treasury and the central bank authorities from 2020.”
The SMP seeks to assist the troubled country to implement key reforms in line with the TSP and help build a track record of implementing sound economic policies as it seeks to normalise relations with the international community.
Clearly, Zimbabwe must take the reform agenda seriously. The success or failure of economic strategy will directly depend on this.