Uphill task for Mthuli Ncube

HARARE - All eyes are on Finance minister Mthuli Ncube as he presents his maiden national budget today.

The Finance minister has so far angered the generality of the Zimbabwean population after he introduced an unpopular tax on electronic transactions that triggered price increases of mostly basic products.

As a result, the cost of living has risen beyond what most people could afford, with an average family of five now needing in excess of $1 000 per month to survive.

While the inflation rate is officially hovering above 20 percent, in actual fact the figure is much higher.

Notwithstanding, expectations are high among ordinary Zimbabweans who are groaning under the weight of over taxation, high unemployment and sky-rocketing prices that Ncube could cheer them up today.

United Kingdom-based academic Alex Magaisa said the test for Ncube is cutting huge government expenditure.

Government has been spending far more than it receives.

Magaisa said the record thus far shows that Ncube has been heavy on raising revenue but light on cutting expenditure.

“Let’s see how he deals with it. Government has accumulated domestic debt to fund the deficit. The Treasury Bill has been a favoured instrument. Generating fictitious Real Time Gross Settlement (RTGS) balances has been reckless. Government has been printing money unsustainably. Let’s see how Ncube intends to deal with that problem,” said Magaisa.

University of Johannesburg researcher Pedzisai Ruhanya concurred that cutting government expenditure is the real test for government.

He said today’s budget presentation presents an opportunity for President Emmerson Mnangagwa’s government to clearly spell out the politico-economic direction of the country for the next 12 years on how the priorities of the State are.

“It will show what this government seeks to address in terms of the macroeconomic fundamentals that should be addressed to address industrial production, liquidity crisis, mining and agricultural production.

“Cutting the huge government spending will be key to the success of this budget. I doubt that given the patronage, parasitic and clientelistic outlook of Zanu PF minister Mthuli Ncube will dare cut government expenditure through for instance reducing size of public service and privatising loss-making parastatals. This is where these parasitic networks who politically support and fund Zanu PF feed from.

In a statement, the Zimbabwe Human Rights NGO Forum said the State should do more in allocating funds towards the justice delivery system and government structures that enhance the observance of human rights and ensure that there is an equitable distribution of wealth among all citizenry.

The Forum noted that it is impossible to ensure that people enjoyed economic and social rights where there was inequitable distribution of wealth, noting that “economic difficulties are a breeding ground for social unrest and repression”.

“The human rights approach to budgeting can and should be implemented by the Government of Zimbabwe to ensure a greater level of fairness and respect for human rights, even during times of economic difficulty as currently experienced in Zimbabwe,” it said.

Economist Bright Matibiri said Ncube must find ways of eradicating arbitrage opportunity in the foreign exchange market where the United States dollar is trading at rates that are much higher than the fixed exchange rate in the official market.

He said the parity between the RTGS and bond notes vis-à-vis the US dollar is promoting rent-seeking behaviour, which breeds corruption.

“In my view, the minister should call a spade a spade and officially declare that market forces will be used to determine the exchange rate between Nostro Foreign Currency Accounts (FCAs) and RTGS FCAs as there are no fundamentals in place to support the parity policy,” said Matibiri.

“This policy pronouncement should, however, be supported by sound economic fundamentals, including an end to quantitative easing as a way of ensuring that the value of the local unit (RTGS FCA) is stable and acceptable to the economy as a medium exchange.”

He said maintaining a one-to-one policy will without doubt lead to viability problems for exporters with low retention percentages as they are required to surrender export proceeds at the official rate while their local cost structures are predominantly based on RTGS/bond prices which are at a 250 percent premium to the US dollar in line with dictates of the market forces.

Matibiri said Ncube must also put in place mechanisms for ensuring businesses operate viably as well as improving competitiveness in order to attract credible foreign investments in key sectors of the economy such as manufacturing.


 

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