2016 Mid-Term Fiscal Policy Review
On Thursday, September 8 2016, the Minister of Finance and Economic Development, Hon Patrick Chinamasa presented the 2016 Mid Term Fiscal Policy Review to the Parliament of Zimbabwe.
The highlights are sobering. Revenue in the first half of 2016 was 9.8% lower than target; Government expenditure overshot budget by US308 million; Diaspora remittances declined by 15%; GDP growth was 1.2% against an initial target of 2.7% which was revised downwards to 1.4% in May, 2016. Diamond production was 15% of target and government was spending 96.8% of total revenue collected on its wage bill. Zimbabwe’s external debt stood at US $7.5 billion and total debt stock at US$9.6 billion.
To counter the above, the Minister proposed to:
- Cut 25,000 jobs by December 2017, saving US$155 million;
- Freeze civil servants bonuses for the next two years to save US$180 million;
- Close some embassies and cut down on government foreign travel;
- Cut Civil Service salaries, including ministers’ by between 5 and 20% starting October, 2016;
- Revise the remuneration framework for public enterprises, statutory entities and local authorities.
- Maintain the multi-currency system to bolster business confidence.
EMCOZ makes the following observations on behalf of all the employers of Zimbabwe:
THE ISSUE(S) AT STAKE
- Confronting Our Reality
This review is a long overdue acknowledgement by the government that the country cannot continue to spend money it does not have. This is to be commended.
- Corrective Measures taken
Efforts to reduce the budget deficit have to be a lot more robust than the commendable steps taken. If the 25,000 jobs to be cut are from the lower echelons of the civil service only, the impact will be minimal. EMCOZ proposes that all government Ministries be conflated to a maximum of fifteen and all deputy Ministerial posts be declared reduntant.
All State Enterprises have to be commercialised while statutory entities and local authorities have to be run on a sustainable cost recovery basis.
Government has to tackle corruption head on and reduce State Enterprises’ debt books. The Power Utility alone is owed US$1.1 billion.
Government should also resist populist measures which place intolerable burdens on the economy.
THE BUSINESS POSITION
EMCOZ commends government for rationalising its expenditure priorities. To grow the economy, necessary sacrifices have to be made in recurrent expenditure and a promising start has been made. Capital infrastructure development has to be resumed to make the economy more competitive.
Funding of agriculture has to be thought through so that government does not continue to fund inputs which do not realise the expected yields. It is better to make farmers borrow working capital and then pay them timeously for their production.
We hope the spirit of pragmatism started here will be nurtured until it brings our economy back to full health.