GOVERNMENT will strictly adhere to tough reforms announced in the 2019 National Budget, as it demonstrates to international financiers, particularly the IMF, that it is ready to walk the talk.
The Budget speaks to the IMF’s Staff Monitored Programme, an informal and flexible instrument for dialogue between the lender and a member country.
Finance and Economic Development Minister Professor Mthuli Ncube presented a “brave” US$8,16 billion Budget that speaks to the obtaining challenges, while also capturing the aspirations of economic transformation going forward.
Some of the bold measures include containing the budget deficit to single digit levels; abandoning the practice of incurring extra budgetary expenditure through Treasury Bills; reducing recourse to Central Bank lending; and privatisation of parastatals, among others.
The global engagement and re-engagement processes being steered by President Emmerson Mnangagwa’s Government is understood to have been a consideration in adopting some IMF recommendations in the Budget.
The IMF has expressed concern over the huge wage bill, which gobbles 93 percent of revenues.
Government is reducing this via a five percent salary cut for senior officials right up to the President, eliminating an estimated 75 000 ghost workers, and strictly implementing its retirement policy.
The number of foreign missions, which in 2018 have spent US$65 million against a Budget allocation of US$50 million, is being reduced.
Reserve Bank of Zimbabwe Deputy Director for Economic Research Dr Nebson Mupunga confirmed last Thursday at the sixth annual collective bargaining summit in Nyanga that: “The Budget is going to be anchored on the Staff Monitored Programme which we are going to enter with the IMF.
“That programme has got stringent conditions that we are going to adopt as a country as a way of containing inflation and also as a way of trying to solve the fiscal deficit.
“And one of the commitments that have been made is actually stop accommodation of Government budget deficit by the Central Bank.”
Government expenditure is mainly responsible for high money growth in the market, but robust measures have been designed to deal with the deficit.
The two cent tax announced in October is one of the measures aimed at addressing the deficit.
Dr Mupunga said resolving Government expenditure was one of the “major targets” that Harare would be “judged under the SMP”.
“There is commitment to reduce expenditure; there is also commitment to ensure that there is no recourse to Central Bank for the financing of the budget deficit,” said Dr Mupunga.
By the end of August, public debt stood at US$17,69 billion. Domestic debt accounted for 54 percent of the overall debt, up from 49 percent. External debt receded to 46 percent from 51 percent.
It is highly likely hoped that the public debt statutory limit of 70 percent will be breached by end of year.
With year-on-year inflation also shooting up to 20,85 percent in October driven by a wave of price increases, Government is keen on rebalancing the economy.
The RBZ expects year-on-year inflation to decline in 2019 and potentially end the year on below 10 percent.
The IMF 2019 inflation forecast is better than the RBZ’s at five percent.
Dr Mupunga said inflation is anticipated to fall on the back of price decreases in the absence of significant salary increments.
“We are going to see most retailers reducing the prices because they are beyond the reach of most people. So in such a case, we expect inflation to significantly go down next year, and in this case it will be less than 10 percent,” said Dr Mupunga.