AS we await the 2018 budget statement, a window of opportunity avails itself, once again, for policy makers to allocate the precious resources wisely in order to stimulate growth and revive the flagging economy.
Zimbabwe public finances have, for many years, neglected the developmental and infrastructural needs of the economy in pursuit of a consumptive expenditure. Resultantly, the broad desire to industrialise the country and hence uplift the livelihoods of its people by ushering decent jobs and opportunities for private capital to flourish has not materialised.
That Zimbabwe does not learn, even from its neighbours and progressive peers, is a hard and bitter pill to swallow. For many years, the government has run unsustainable budget deficits, themselves a source of unproductive money supply that eventually led to the abandonment of local currency in early 2009. Even after dollarisation and a few years of circumstance-induced cash-budgeting fiscal regime, that prudence has since eluded the policy makers.
The budget deficit has sadly been creeping up and is expected to close the year at around 11 percent of GDP. Just across the Zambezi, the Zambians, with the same fiscal resource envelope as Zimbabwe at around K39,4 billion ($3,9 billion), equally struggles with its finances but are commendably disciplined enough to run a budget deficit at 6,1 percent of GDP. Tanzania is even more frugal with its budget deficit target at 4.5 percent of GDP for 2017.
The civil service wage bill has been a black hole for many years, and so have been their bonuses that are not linked to performance. And as long as the policy makers do not adopt the private-sector approach in running the affairs of the Government, the much desired developmental state that all Zimbabweans aspire to see and experience will elude this generation, indeed a painful but living reality.
In 2017, the public sector wage bill will most likely gobble 91 percent of revenues in Zimbabwe. Comparatively, Zambia, whose population is about 16,5 million, around the same levels as Zimbabwe, will spend around K19 billion ($1,9 billion) this year on civil service wages.
This is about only 47 percent of its revenue. The Zambian figures surely cast our own expenditures in very bad light as those of the biblical sinner who hasn’t seen the light. This year, Tanzania will spend about 22 percent of their SHS29.5 trillion government revenue on wages and salaries.
In fact, their total recurrent expenditure is targeted at 60 percent of revenue! A reading of these figures says a lot of about the desire of our neighbours to uplift the lives of their people and focus expenditure on areas that have higher multiplier effects on infrastructure development and job creation.
Indeed, the progress these countries have been making, although slow, is visible to the naked eye and confirms to us Zimbabweans that it is possible to do the right things and get the right results.
A look at Mandahill, East Park, Cosmopolitan and Levi Junction shopping malls, among the more than 10 busy shopping malls that have mushroomed in Lusaka alone, bears testimony to the rising middle class and strengthening domestic demand in Zambia. Compared to our own ghost cemeteries at Westgate, High Glen and Chitungwiza shopping malls that struggle even to sustain pharmacies and fast food outlets, the signs are clear that indeed Zimbabwe has lost its place and respect in Southern Africa and our policy makers need to think and act in ways that show that indeed we are ready to transform the economy.
Although endowed with more natural resources than these peers, Zimbabwe has struggled with its balance of payment, itself a sign of poor competitiveness culminating from years of inability to attract capital and long-term investment. Although within modest ranges, Tanzania and Zambia all managed to have surpluses on their overall balance of payment positions in 2016 at $305 million and $187 million respectively.
On the contrary, our foreign exchange reserves resemble the famous mushikashika cars’ fuel gauges that are always on empty, thus angogara akatsvuka and getting about $3 on every refill, ichingoramba yakatsvuka. Tanzania and Zambia, although not in the most enviable position, have the comfort of around four months import cover whilst Zimbabwe’s is barely two-week’s cover. At the end of 2016, Tanzania had $4,235 billion in foreign exchange reserves. Botswana is even more impressive with about 18 months of import cover.
The poor productivity and competitiveness on the back of increasing budget deficit and hence broad money supply growth has not come without other costs for Zimbabwe. The upheavals on the monetary sphere, in particular the cash and foreign exchange shortages, are a new headache that needs urgent pain-killers.
For a country that dollarised in 2009 to have far less US$ than its neighbours that use their own currencies is a myth that many students in economics will grapple to comprehend for many years to come. Although with deposits of around $7 billion, Zimbabwe’s real cash position in nostro balances supporting these deposits has dwindled to below $300 million, triggering a biting cash crunch that even the bond notes have failed to extinguish.
Although significant progress has been made in the adoption of plastic money and mobile money transactions, with these now accounting for about 26 percent and 73 percent of the volumes in the national payments ecosystem, the fact that the informal sector remains a significant component of our economy means that cash still plays a huge role in the lives of our people. And indeed the dignity of our people should be upheld.
Across the borders in our neighbouring countries, cash shortages are stories and a phenomenon so distant that they are associated with bad social media jokes about Zimbabwe. Zambia, a country that uses its own currency in the Kwacha, had foreign currency deposits the equivalent to $1,3 billion in its banking sector on 30 September 2017.
These US$ represent about 26 percent of its total banking sector deposits that stood at about K50 billion. That Zambia, which is not dollarised, has about 7 times more US$ than Zimbabwe that is dollarised should be a rude wake-up call for our policy makers.
As at 31 December 2016, Tanzania had TZS6.803 trillion (approx. $3 billion) in foreign currency deposits, thereby representing about 34 percent of its total deposits. In fact, Tanzania has, since 2012, maintained foreign currency deposits at around 30 percent of total banking sector deposits, itself a sign of confidence that investors and depositors have in the economy and its banking sector.
Granted, Zambia and Tanzania have their own problems relating to inadequate investment in infrastructure, poor social security schemes, high unemployment levels and so on, in fact the same challenges that Zimbabwe has. More importantly, they are equally victims of massive externalisation and related illicit outflows.
Tanzania’s president, John Pombe Magufuli, has declared war on mining companies and in June 2017, hit Barrick Gold with a whopping $190 billion fine for under-declared earnings.
Notwithstanding these common problems, our peers have exhibited maturing and progressive economic management regimes, the very strides that have been slowly transforming these economies and with consistency, will continue to deliver dividend. And indeed a child born today in Zambia or Tanzania has better prospects in life than one born in Zimbabwe as long as we continue to follow the same unyielding economic management policies.
The analogy of Ghana and South Korea that, in 1957, were poor countries with the same GDP per capita at $490 but whose fortunes today are worlds apart on account of the different economic management policies they pursued should continuously remind us of our obligations to future generations.
Today, Ghana’s per capita GDP at $1,530 is a pale distant shadow to South Korea’s $25,538. Without doubt therefore, the upcoming budget, more than anything else, will provide the clearest indication on how the new leadership intends to change the fortunes of this country.
And Minister Chinamasa, once again, has the opportunity to instil confidence by breaking with the tradition of pursuing the largely populist consumptive expenditure models that have been the source of stagnation and recession for many years.
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