Chinamasa walks tight rope

HARARE - Zimbabwe’s government is due to announce the National Budget on Thursday, amid mounting unrest.

Angry depositors have vandalised property at banks after caps were imposed on withdrawals — a sign of a deepening liquidity crunch in the country.

The maiden annual budget speech by Finance minister Patrick Chinamasa comes against a background of economic stagnation, rising unemployment standing at 80 percent and cash shortages.

Analysts have warned Zimbabweans not to expect much from the delayed 2014 National Budget as the country sinks into a second recession.

Chinamasa faces a daunting task of giving economic direction to a country that is slowly losing its growth momentum.

This comes as cash-strapped Zimbabweans are expecting the new government to live up to its election promises of providing 2,2 million jobs, improving social services, growing the economy and improving the quality of life of ordinary Zimbabweans, among other expectations.

Economist Christopher Mugaga said in view of the tightening liquidity crisis, Zimbabweans should not
expect miracles from the new Treasury boss.

“We are looking at an approximately $4 billion budget but there are no significant changes to be expected,” he said.

Zimbabwe has struggled for direction since the elections and the recently unveiled economic blue print dubbed the Zimbabwe Agenda for Sustainable Socio-Economic Transformation (Zim Asset) has failed to excite the market.

Mugaga noted that declining metal prices and limited fiscal space will affect Chinamasa’s capacity to unveil adequate funding to critical areas such as health, agriculture, education and power generation among others.

The southern African country’s gross domestic product (GDP) growth fell from double-digit levels in 2010-2011 to an estimated 3,4 percent in 2013, reflecting weaker commodity prices, especially for gold and platinum as well as reduced diamond production.

Agriculture performed dismally this year due to poor rains and lack of farming inputs while capacity utilisation fell below 40 percent in manufacturing.

Once known as “the breadbasket of southern Africa” for its harvests, Zimbabwe now depends on international aid to feed a quarter of its 13 million people, following seizures by the government of thousands of white-owned farms.

Rather than redistributing land to poor black farmers, as Mugabe claimed happened, the government gave many of the best farms to leaders of the ruling party, Zanu PF. Most of the seized farmland now lies fallow because of acute shortages of seed and fertilisers.

Figures from the Zimbabwe Statistical Agency reveal that not a single new non-farm job has been created for 25 years, while the National Social Security Authority (Nssa) recently reported that 700 businesses have closed in Harare since 2009.

The trade gap is estimated at $3,5 billion this year or 26 percent of GDP, with exports down more than 10 percent in the past year, as a result of which the debt-stressed country, according to the IMF, is borrowing $1 billion per year offshore, pushing the foreign debt burden above 110 percent of GDP.

Tony Hawkins, a University of Zimbabwe economics lecturer,  says Chinamasa has to try to balance the spending promises with a deteriorating budget.

“Though the country is operating on a cash budget, the actual deficit is between $200 million and $300 million or 2 percent of GDP”, Hawkins said. “Since the central bank cannot print money in a dollarised economy, there is no scope for quantitative easing and little room for tax hikes.”

Hawkins noted the only way out was spending cuts or more offshore borrowing.

“China is the obvious option since Harare is not eligible to borrow from the multilateral agencies because of its $7 billion arrears”, Hawkins said.

“The previous national unity administration did sign a staff monitored programme with the International Monetary Fund (IMF) in midyear, but this is only a first step towards debt relief and eventual access to fresh funding from the IMF and World Bank, which, at best, is unlikely to materialise before 2015 or 2016.”

Tendai Biti, the former Finance minister, said Chinamasa must come up with a credible budget that seeks to resolve the burgeoning domestic arrears.

“The government has been borrowing to pay the wage bill, in the process committing the cardinal sin that you do not borrow for consumption or recurrent expenditure”, Biti said.

“To borrow close to $300 million, in a space of 100 days is irresponsible and unacceptable more so when it is being done behind the back of Parliament.”

Biti noted that government was living to pay wages alone.

“There has been de facto shut down of government. Ministries starved of resources have basically ground to a halt,” Biti said.

Comments (12)

Kunge arikunzi vhima Charuveki yarasika. Chinamasaka tiza undokanda tsamba wave ku OR Airport.

Maita Manyuka - 17 December 2013

ZANU chamakadya chamuka, ndiwoka ma elections amakabira muna July.

Edzai - 17 December 2013

Totenda maruva tadya chakata. Totenda dzanwa dzaswera nebenzi. We wait with bated breath the budget announcement by Chamamasa and his Nikuv buddies. Kikikiki seka zvako mwana womuHera.

Mutirowafanza - 17 December 2013

is Biti now an economist...most of our problems started during his tenure...he was so reckless with imports and now Zim imports everythn becoz of the process sending thousands of jobs of on a tailspin...ndatenda

inini - 17 December 2013

Trained to kill and never to save or make life better is the mentality of ZANU people.

Ziziharinanyanga - 17 December 2013

@inini you need to have your head examined... how can you in your right mind blame Biti. Now Zim imports everything? do they have to do so if they produced good and or services within? They import because they don't have stuff buddy.. You can not bury your head in the sand and use your ass to think man. Wake up and smell the coffee, ZANU PF told everyone they on the elections, and now they should govern without blaming anyone. Kan uri a member of any team unoziva kuti when you get on the field of play, you can not say ahhh the three goals were scored before I got in so they don't count for me when you lose... Time to play ball ZANU-PF so Chinamasa should deliver... As for your first five words, I can ask you the very same question about Chinamasa, the last time I checked he was a lawyer not economist. By the way you need not be an economist to run the finance ministry, you need a very sophisticated brain and a lot more smart people below you

tino - 17 December 2013

@Inini akakuroya akafa. Handiti maiti Biti arikuramba nemari? Nhasi chaipa chinyi, handiti ndimi muripanyanga?Tongai tione. Mati mambodiyi, muchamama chete.

Kachembere kekwaChivi - 18 December 2013

@ Tino,waita hako nekugadzirisa murwere uyo anonzi Inini

hama yaBiti - 18 December 2013

endai ka nemaWar vet kuOffice kwaCHINAMASA munoita futi zviya zviya

hama yaBiti - 18 December 2013

@Inini, I'm sure you a very small boy, You can't follow the trend of the our economics, When Baccosi was introduced I'm sure you were in Zero grade. What you wrote i don't think it was coming from your head, you should have copying somewhre.

STRANGER - 18 December 2013

@inini, go back to school.

zero - 18 December 2013

Zvaana ININI zvakafanana naPsychology Maziwisa to support something that does not work, i cant see why Psychology at his age is looking forward to see miracles from Mugabe, because he was appointed a body member in a Diamond mining company, shame on you guys vakaita saana ININI

garwe - 18 December 2013

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