Austerity shocks to subside in 6 months

Finance and Economic Development Minister Professor Mthuli Ncube is introduced to Zimbabwe National Defence University lecturers — Brigadier-General Adnan Ahmed Khan and Air Commodore Sahhjahau Sahibzada (second from left) — by the university’s Vice Chancellor and Commandant Air Vice Marshal Michael Tedzani Moyo (right) after presenting a paper on the economy in Mazowe yesterday. — (Picture by Tawanda Mudimu)

Painful shocks from ongoing economic reforms will substantially subside after six months, as the period prior coincides with the implementation of most interventions Government is instituting to stabilise the economy, Finance and Economic Development Minister Mthuli Ncube has said.

Government has been criticised over some of its painful but necessary economic reforms, part of which are austerity measures being implemented through the 2019 National Budget.

Minister Ncube yesterday said that Zimbabwe would inevitably experience significant economic turbulence, as the Government rolls out interventions to stabilise the economy.

Addressing students of the National Defence Course-Intake 7 of 2018 at the Zimbabwe National Defence University in Mazowe, Minister Ncube said there will be increased turbulence from ongoing reforms over the next six to eight months.

“Reforms are continuing, but what happens is that over the next six months we are carrying out more reforms and will achieve quite a bit, so obviously after six months then we have less reforms and towards end of year, even less reforms.

“So we are doing more now and less as we go forward, but it does not mean reforms are finished we will still carry out more, for instance privatisation takes a while so it always carries on, but certainly on the macro-economic front, we should have made quite a bit of progress,” he said.

However, Minister Ncube said that some of Government’s interventions had started bearing fruit given that the State’s finances were now “clearly in a better position”.

Since November 2018, Government has consistently achieved surpluses on its income and expenditure accounts while Treasury is beginning to see surpluses on the current account.

Government received a lot of stick from critics who labelled it insensitive to the plight of hard- pressed citizens when it introduced the intermediated money transfer tax to capture  the informal sector, which had not been paying taxes.

Recently, the opposition MDC Alliance and its sympathisers — the Zimbabwe Congress of Trade Unions (ZCTU) and civic society, — coalesced around high fuel prices after Government adjusted the prices to stem arbitrage opportunities, staging a violent and bloody mass stayaway.

A directive by the Reserve Bank last year for banks to separate Real Time Gross Settlement (RTGS) accounts and foreign currency accounts (FCA) was also misinterpreted by the market, resulting in exchange rate spikes on the black market.

Illegal currency trading then ignited a series of price spirals, with prices of goods and services now tracking parallel market exchange rates for foreign currency, especially the US dollar.

Minister Ncube said this country may not be able to achieve prosperity without paying the price through hard and painful measures, but necessary economic interventions to be implemented come over the next few months to a year.

He said that reform interventions will be guided by Transitional Stabilisation Programme (October 2018-December 2020) launched in October 2018, which provides an initial stepping stone towards realising Vision 2030.

President Mnangagwa has pronounced his Vision 2030, which entails transforming Zimbabwe into an upper middle income economy with a per capita income of US$3 500 per year.

The TSP is a precursor to two upcoming Five-Year National Development Plans, covering the periods 2021-2025 and 2026-2030 respectively.

The overarching policy thrust of the TSP is to stabilise the macro-economy and the financial sector through policy and institutional reforms, geared towards laying a foundation for Triple S Growth — Strong, Sustained and Shared.

Minister Ncube said the 2019 National Budget, which he themed “Austerity for Prosperity” provided the initial macro-fiscal financial framework for the implementation of the TSP..

The 2019 Budget projected a 3,1 percent growth this year, slightly slower than last year’s projected 4 percent. Economic growth this year is expected to be negatively affected by the late onset of the rains.

Specific interventions in the 2019 Budget centre around dealing with fiscal indiscipline, removal of pricing and policy distortions, improving foreign currency generation and establishing efficient market- based mechanisms for allocation.

Further, the Budget entails jobs creation, particularly for the youth, promotion of productivity, efficient public service delivery, parastatal reforms, re-engagement and investment promotion, promotion of good governance; and fighting corruption, among others.

In her recent presentation to Cabinet, she said migration was increasingly being recognised as a major human development issue which, if effectively managed, could contribute towards socio-economic development.

“For Zimbabwe, between 2009 and June 2015, international remittances have scored second after exports in terms of foreign currency earnings,” said Dr Nzenza. “According to the 2017 National Budget Statement, formal remittance receipts amounted to US$935 million in 2015 and US$780 million in 2016.

“The National Labour Migration Policy accordingly seeks to complement other existing frameworks such as the National Diaspora Policy and Trafficking in Persons National Plan of Action in order to harness the development gains from labour migration while extending protection to our citizens in other countries.”

Remittances to low- and middle- income countries reached US$466 billion in 2017, an increase of 8,5 percent over US$429 billion in 2016, according to the 2018 World Bank’s latest Migration and Development Brief.

Despite the benefits that come with migration, there has been numerous reports of Zimbabweans being exploited and abused by employers in destination countries.

Many Zimbabwean labourers are caught in a web of irregular migration with frequent reports of abuse, exploitation and threats of deportation.

In 2016, Zimbabweans were shocked by reports of 200 women migrant workers who had been trafficked into the Arab states and were living under inhuman conditions and extreme exploitation.

The Government had to mobilise resources to quickly assist the victims to return home.

Apart from the Arab states reports, Minister Nzenza said Zimbabwean migrant workers within the Southern African region were also prone to xenophobia, victimisation, harassment and non-payment of wages and pensions, largely due to their undocumented or irregular migrant status.