Chronicle Editor
TREASURY this week gave the nation a synopsis into the 2019 first quarter economic performance with the major highlight being improved revenues of RTGS$1,9 billion (against a target of RTGS$1,8 billion) while expenditures were contained at RTGS$1,5 billion against a target of RTGS$1,7 billion. This has led to savings of RTGS$218.9 million, and a budget surplus of RTGS$443.1 million — remarkable given the immense demands on Treasury by various sectors of the economy.
This is not the first time Government has lived within its means. The fourth quarter performance report for 2018 indicated that Treasury raised US$166 million in the last two months of 2018 from the two percent tax on all electronic transactions, and almost US$100 million was raised in January alone. In addition, the monthly budget deficit declined from US$242 million in November to a surplus of US$733 million in December, and a provisional surplus of $113 million for January, an impressive turnaround in such a short time.
During the last quarter of 2018, Government made significant cuts to expenditure in five main areas: First, it ended the unsustainable practice of issuing Treasury Bills to finance the deficit, forcing it to spend within its means and within the budget.
Secondly, it reduced the public wage bill by cutting salaries of senior government officials by 5% across the board, retiring over 3 000 youth officers, and establishing a more modest bonus system for civil servants that saved over US$75 million in 2018 alone.
Thirdly, it diverted resources to pressing areas by freezing the hiring of non-critical staff, while hiring 3 000 additional staff in the education sector and almost 2 000 in the health sector.
It also cut unnecessary expenditure and “perks” for ministers and Members of Parliament, most notably by suspending the procurement of vehicles. The fiscal consolidation continued in the first quarter of this year and Finance and Economic Development Minister Professor Mthuli Ncube is pleased with the outcome.
Writing in The Chronicle this week, the Minister revealed that the most important step, and perhaps the most difficult, in reforming an economy – that of balancing the budget — had been achieved in record time. However, the question remains: What does this surplus mean for ordinary Zimbabweans? In answering that burning question which has naysayers doubting his policies, Prof Ncube said: “Well, the values enshrined in responsible economics have already started to bear fruit. Even with the uncontrollable outside factors from Cyclone Idai and drought; our progress remains. Our foundations for long-term stability are being built. Indeed the surplus has already allowed us to tackle these particular crises head on, and with many successes.”
He went on to detail achievements notched by Treasury as a result of the budget surplus. “Government, for example, had initially earmarked RTGS$50 million towards mitigating the impact of Cyclone Idai. The above allocation, however, has since been doubled to RTGS$100 million to cover the emergency requirements. This would be impossible without the budget surplus,” Prof Ncube said.
“Likewise, the recent ZUPCO subsidies which are helping so many Zimbabweans on a daily basis are a direct result of this budget surplus. Sensible economics always trickles down”.
Indeed, the foundation has been laid. The Transitional Stabilisation Programme, the first step of government’s economic reform programme, was launched in October 2018 and its goal was clear: To stabilise the economy, attract investment and lay the foundation for shared and sustained growth.
The structural reforms introduced under the TSP are providing crucial breathing room and protecting the economy from failure. While inflation is yet to be fully tamed, fiscal consolidation measures, reinforced with a tight monetary policy stance together with the liberalisation of the exchange rate, are containing previously uncontrolled inflationary pressures.
As a nation, we must continue to tackle the widespread indiscipline in the foreign exchange market which is feeding inflation. What Zimbabweans need to focus on is that the fiscal position of the country has been turned around in just six months and this is just the beginning. We reiterate again that patience is required from all as the process of reform gathers pace. The ultimate goal is to regain control of our monetary and fiscal policies and reintroduce our local currency with the RTGS$ anchoring that process. But it is a process.
Said Prof Ncube: “You cannot run before you can walk. And our economic legs have been broken for too long, we must first recover and get back on our feet before racing ahead with a full on new domestic unit. We must continue to fine tune the interbank market making it more efficient whilst also putting in place the micro institutions for making sure that monetary policy begins to work”.
He said a US$500 million facility sourced from outside of Zimbabwe was meant to deal with demands for meeting external payments from importers and others. “While this of course is not a long term solution, a wounded economy sometimes needs crutches, aid, or support from friends on the tough road to recovery,” Prof Ncube said.
We agree totally and acknowledge the great strides and progress that has been made so far.
Bongani Ndlovu
Online Reporter