Prosperity beckons, as austerity ends in 2019: Muthuli Ncube

While Government has instituted a batch of key macro-economic reforms since late last year, which analysts say have set the economy for recovery and sustainable growth, the chief architect of the changes is not done just yet.

After a decade of economic contraction characterised by hyperinflation, which peaked at 231 million percent at the last official count in August 2008, Zimbabwe’s gross domestic product shrunk by as much as 50 percent in the decade to 2008.

Government efforts to restore key economic fundamentals pre and post dollarisation in 2009 have also been hindered by western sanctions, which have blocked access to low cost funding.

Dollarisation though provided brief respite, between 2009 and 2016 when the economy registered average growth of 7 percent annually, but once the basis (low trough from a decade long meltdown) of supporting this growth bottomed out, crisis returned.

Since taking over the finance portfolio in September 2018, Finance and Economic Development Minister Mthuli Ncube has instituted a cocktail of reforms including a transactions tax, separation of RTGS and foreign currency accounts and liberalisation of fuel procurement, to rebalance the economy.

He has also presided over conversion of US dollar electronic balances to local currency, introduction of the interbank foreign market, scrapping fuel subsidies, banning the multicurrency system and the reintroduction of the Zimbabwean dollar.

While so much has been undertaken within such a short space of time, Minister Ncube indicated last week that the somewhat painful major reforms were still on the cards up to the end of this year, as he bids to restore proper economic fundamentals.

And for a man not lost to the purpose of his mandate as well as pain the majority of citizens have endured since the onset of this necessary macro-economic reform programme, Minister Ncube said the major economic adjustments will persist until year end and then focus will shift to prosperity interventions of job creation and productivity.

Minister Ncube said Government was coming to the end of the major macro-economic adjustments, which he said would at the moment continue until December after which focus would fall on production, prosperity and creation of new jobs.

The reform initiatives have, however, triggered runaway inflation, which has raced from a lowly 5,39 percent as at September last year to 176 percent by June this year.

Together with floating of the exchange rate, many citizens have seen their incomes extensively eroded by the twin effects of rising prices and wild exchange rate movements, sparked by speculation, since Zimbabwe is heavily dependent on imported goods.

But since the banning of the multicurrency in June, speculative exchange rate changes have disappeared and relative sanity returned to the pricing of most products.

The inflationary challenges though come against the backdrop that wages and salaries have remained largely stagnant, putting many basic goods and services beyond the reach of many.

“Really, the major macro-economic policy adjustments we are coming towards the end of that and really my view is that within the year 2019 we should be able to complete all the major adjustments.

“And then beyond that, we put those behind us then we focus on jobs, productivity and competitiveness to see how we can focus these on the micro- economy so that we can lay the foundation for real prosperity going forward, having concluded all the major macro-economic adjustments” the finance minister said.

Minister Ncube has previously said that while the reform agenda let loose the inflation scourge, underlying factors for high inflation were already in place only waiting for a trigger to bolt away.

He, however, indicated from the outset his reform initiatives, dubbed austerity measures, would inevitably cause suffering among citizens, but remained necessary to correct ills of the past.

Frankly, his interventions have already started bearing results and for the first time in a long period Treasury has consistently posted primary budget surpluses since November 2018.

Treasury recorded a primary budget surplus of $803,6 million between January and June 2019 on the back of fiscal discipline in line ministries and government, as the TSP initiatives start to bear fruit.

And between January and March this year, Zimbabwe registered a positive current account balance of US$200 million, also the first since dollarisation in 2009, which provides signs that the country’s macro-economic fundamentals are falling in place.

Although Zimbabwe remains largely trapped in the throes of high inflation, it has recently experienced relative price stability, seen official and parallel market rates converge, is starting to see shorter fuel queues, growing foreign currency balances in the banks and witnessing improved access to forex by companies on the interbank.

Minister Ncube stated in his macroeconomic reform document, Transitional Stabilisation Programme, that the prevailing environment of macro-economic imbalances presented constraints to rapid economic development, as public deficits fuel unsustainable.

The Treasury chief noted that large fiscal borrowing requirements and money supply growth, in the process consumed scarce foreign reserves and undermining currency stability.

The fiscal deficit, a major cause of macro-economic instability and financial sector vulnerability, was estimated at US$1,4 billion at the close of the first half of 2018, and was projected at over US$2,7 billion in the absence of corrective measures being taken.

Annual growth in money supply to May 2018 stood at 40,8 percent, from US$6,5 in 2017, underpinned by growth in domestic credit of 47,3 percent, mostly to Government. And so, these were some of the fiscal misnomers the minister sought to correct.

Presenting his 2019 midterm policy review statement last month Minister Ncube said a relentless commitment to full implementation of key macro-economic reforms, void of policy reversals and inconsistencies had, as intended, set a solid stabilisation base for triple “S” growth, which is strong, sustained and shared growth.

His sentiments were recently shared by ex-MDC-A parliamentarian and former Bulawayo legislator Mr Eddie Cross who said “The economy is about to turnaround.”