Regime plunging Zimbabwe into fiscal disaster

Former Finance Minister Tendai Biti

HARARE – A fiscal disaster is looming as President Robert Mugabe’s Zanu PF government is on a spending spree ahead of 2018 elections, often funded through recourse to expensive debt.

The reckless and carefree expenditure — amid a widening budget deficit and waning national revenue collections — could sink the already suffocating nation deeper into financial crisis, experts have warned.

The ruling Zanu PF, which has since endorsed 93-year-old Mugabe as its presidential candidate in the forthcoming election, has lined up a string of high expenditure programmes, including splurging huge sums on campaign vehicles and the Command Agriculture scheme.

This week, Agriculture, Irrigation and Mechanisation minister Joseph Made announced that the broke government had approved the injection of $440 million into Command Agriculture, with Cabinet’s approval.

This came hard on the heels of another announcement by Local Government minister Saviour Kasukuwere that government had procured 226 top-of-the-range Isuzu KB280 double cab vehicles for chiefs at a total cost of $11 million.

The vehicles, Kasukuwere said, were being imported from neighbouring South Africa, funded by the hard-pressed exchequer, which has been issuing Treasury Bills in desperate attempts to raise money.

The traditional leaders — who have long been key tools in rallying the rural electorate for Zanu PF — have been clamouring for the vehicles since 2014, but former Finance minister Patrick Chinamasa could not fund the request.

The expenditure bill gets heftier.

The developments have emboldened Members of Parliament, who are now demanding $50 000 each from the Constituency Development Fund.

In the meantime, the lawmakers are threatening to vote against the 2018 Finance Appropriation Bill (proposed budget), which new Finance minister Ignatius Chombo is set to present in Parliament next month, if they do not get their outstanding allowances amounting to $15 million.

Should MPs refuse to pass the Bill, Mugabe may be forced to give in to their demands.

Against all these financial demands, Mugabe’s government is seen resorting to TBs, a debt instrument.

Government debt — domestic and foreign — has ballooned by 58 percent to $12 billion as of September 2017 from $5 billion in April this year.

Although the Zimbabwe Revenue Authority managed to exceed the $863,56 million target in the third quarter of 2017 after it collected $1,03 billion, tax collections have been dwindling as more companies are buckling under the mounting economic pressures.

Also, indications are that government once again faces a huge budget deficit this year, as has been the trend.

Zimbabwe has been running a budget deficit as revenue collections continue to fall below expenditure.

For the whole year 2016, expenditure amounted to $4,923 billion, made up of recurrent expenditure of $3,956 billion and $967,5 million in capital expenses and net lending.

However, revenue collections of $3,502 billion were realised in 2016 against an annual target of $3,850 billion, translating into a negative variance of 9 percent.

The 2016 revenue was the equivalent of 24,7 percent of gross domestic product (GDP), down from 26,3 percent of GDP collected during the previous year.

The Zanu PF government has also been criticised for failing to prioritise essential services at the expense of party programmes.

For example, government is grossly under-funding the health sector, 12 years after African States pledged in the Abuja declaration to allocate at least 15 percent of their annual budgets to healthcare by 2015.

The Zimbabwean government allocates just 6,8 percent to the health sector in the annual budget.

While the ruling party has increased its funding target for this year’s special congress from $2 million to $8 million, the health sector is crying out for funding to acquire basic drugs.

Mugabe has been severely criticised for replacing a more calculating Chinamasa with Chombo, whom analysts say is a Mugabe “yes” man lacking the necessary financial prudence that his new office demands.

Chombo, very unpopular for alleged corruption and pursuing populist policies, is famed for scrapping local authority rates and water bills ahead of the 2013 polls.

Although the trick worked electoral wonders for the ruling party which went on to score big victories in urban areas for the first time since 2000, councils are still bleeding from the resulting effects.

Mugabe has a well-documented history of having turbulent relationships with his Finance ministers, especially those who have shown discipline with money.

“His idea of a Finance minister’s job is that they are there only to keep his political machinery well-oiled and his comforts well taken care of, and without question. With the unquestioning loyalty to Mugabe that Chombo has shown over the years, he is the best man for the job in Mugabe’s eyes,” said political scientist Eldred Masunungure.

Unlike his predecessor Chinamasa, whose attempts to cut government spending annoyed Mugabe and his attempts to cut costs by ending bonuses and cutting ghost workers and 3 000 youth workers from the wage bill, were publicly denounced by Mugabe.

His bid to reengage international financiers was seen as a form of treason, most notably that Mugabe embarrassed Chinamasa by removing him from the helm of the Treasury while he was on official duty in the United States from which he was immediately recalled.

Former Cabinet minister and leader of restive war veterans Chris Mutsvangwa — who has transformed himself into a fierce government critic — sensationally told the Daily News yesterday that prior to presenting the $440 million Command Agriculture financial package in Cabinet, Chombo had chaired a meeting of its stakeholders at his offices where he reportedly said he had no time to fix the economy.

“Chombo said in a confidential brief on Command Agriculture last week that he has neither the intention nor the capacity nor the time to fix the economy in his ephemeral stint as minister of Finance, rather he would just do politicking with national coffers,” Mutsvangwa claimed.

“One most disappointed Command Agriculture apparatchik, after the meeting, called me and confided almost in tears,” said Mutsvangwa, adding that the whole issue was about Zanu PF winning the elections than fixing the economy.

“You recall (that the appointment of Chombo) came after Zec had already closed by-elections, announcing a polling season. So, Chombo at the ministry of Finance is transient,” Mutsvangwa said.

Former Finance minister Tendai Biti also criticised the high-level government spending saying it would kill the economy.

“Our biggest fear is that Zanu PF’s appetite for expenditure is insatiable. Thus expenditure and expenditure obligations will continue to increase whilst the fiscal space continues to shrink. However, this government has exhausted the capacity of domestic resource mobilisation as no one is prepared to accept (treasury bills) TBs anymore. In this situation, we view the return of the Zimbabwe dollar as inevitable,” Biti told the second edition of his State of the Economy Address (SEA) last week.

This comes as University of Zimbabwe professor of economics Tony Hawkins warned that the worst was yet to come as government goes on an irresponsible spending spree.

“We are only witnessing the beginning of it,” he said over the phone from England.

“Basically, this is just a tip of an iceberg, there is much more coming as we move towards elections. The spending on agriculture is very unsustainable given that the maize produced is being sold at a loss (the Grain Marketing Board buys grain at $390 per tonne against a producer cost of $240 per tonne). MPs are also pressing from another end and we are back to the quasi fiscal era we had before the dollar era,” said Hawkins.

He also warned that government’s reckless spending is driving the country into debt, more so that State bureaucrats continue their wasteful and frivolous ways.

“There is a big government debt being created which will have to be serviced by printing money since no one appears interested in taking up TBs anymore. Alternatively, there can be an RBZ (Reserve Bank of Zimbabwe) overdraft, but either way, we are sliding back to the dark pre-dollar era,” he added.

There has been a trend that towards any general election, chefs spend wildly on big-ticket items.

“The latest example should infuriate any taxpayer. Government is spending well beyond its means, creating a big hole in the government debt which you and I are going to pay back. This will dampen the economy. It will get worse as we approach the elections,” said leading economist, Trust Chikohora.

He said the purchase of vehicles for chiefs and increased Command Agriculture funding paints the picture of a government hell-bent on spending money in the final months leading to elections.

“That is not the route to prudence, to caution and to helping the government to grow the financial services sector. That is the route to liquidation and destruction,” Chikohora charged.

Chombo was not answering calls on his mobile phone yesterday.

The country’s main opposition party, the MDC also weighed in saying the vehicles were being used for political expediency by Zanu PF.

“The Zanu PF regime announced that it had purchased 226 Isuzu twin cab motor vehicles for the 226 chiefs in Zimbabwe. The timing of this announcement obviously coincided with the dawn of the electioneering season in the country. It, thus, cannot escape scrutiny that there is a sinister and ulterior motive behind the Zanu PF regime’s decision to buy motor vehicles for chiefs at this juncture.

“At a time when the public health delivery system has virtually collapsed and when most of the country’s district hospitals do not even have an ambulance; one can easily conclude that the decision to buy these motor vehicles for the chiefs is nothing but a blatant vote-buying exercise by the desperate, crumbling and bankrupt Zanu PF regime.

Chief Fortune Charumbira, the President of the Chiefs’ Council, was recently quoted openly calling upon chiefs to campaign for Zanu PF in the forthcoming election because the Zanu PF regime had bought them cars,” MDC spokesperson Obert Gutu said in a statement yesterday. – Daily News

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