Mid-term policy sets tone for fiscal discipline

16 Sep, 2016 - 00:09 0 Views
Mid-term policy sets tone for fiscal discipline

The ManicaPost

Kudzanai  Gerede : Business Correspondent

Chief among Zimbabwe’s economic problems has been failure to rein in Government excessive expenditure including a persistent public wage bill overhang which has suffocated its capacity to spend on growth stimulus resulting in sluggish growth.

Most of the country’s productive sectors which include mining, manufacturing, tourism and agriculture remain subdued as a result of inadequate financing to restart on a productive course. This has resulted in the country’s growth projections scaled down twice this year from the initial target of 2,7 percent as outlined by the Finance and Economic Planning Minister Patrick Chinamasa in the 2016 National Budget down to 1,4 percent as per May Treasury Report and is now expected to be at 1,2 percent at year end.

Analysts have highlighted the need for the country to prioritise resuscitation of the country’s infrastructure and key state enterprises and parastatals such as the National Railways of Zimbabwe which will form the basis of reindustrialisation and economic growth particularly with the establishment of Special Economic Zones.

However a huge financing gap remains the country’s Achilles heel as Government is grappling with budgetary shortfalls to sustain its extensive expenditure bill.

As the public sector work force figures remain relatively unchanged following a recruitment freeze, matters have been compounded by plummeting revenue flows into Government coffers with figures showing the country’s tax collector, Zimbabwe Revenue Authority (ZIMRA) falling short on its revenue targets.

Latest figures show that by year end revenue is expected to be around US$3,75 billion down from US$3,85 billion initially projected. The budget deficit for the first half of 2016 has widened to US$623,2 million against a full year projection of US$150 million and is expected to reach the US$ 1 billion mark by year end at current expenditure levels.

Analysts have welcomed the mid term fiscal policy review statement as a deliberate move targeting at creating fiscal space for Treasury, a precedence which has become standard practice for many governments world over as the global economy has remains subdued since the 2009 recession.

While most Governments are either cutting on expenditure or accepting bailout from international financiers which comes with enormous future debt accrual, for Minister Chinamasa there isn’t any other easier way given the country’s unique realities, but to take a bold decision of imposing a raft of measures to rationalise the wage bill.

Announcing the midterm fiscal policy review statement last week which precedes the 2017 National Budget to be announced in November Finance Minister emphasised the need to strike a balance between sustaining recurrent expenditure at the same time having the capacity to cater for other financial obligations which spur growth.

“Rationalisation measures are meant to reinforce the supply side measures proposed in this Mid-Year Fiscal Policy Review, sustain the wage bill while creating scope for financing drought, debt services and other capital and operations programs,” he said.

Among the key highlights of his announcements was austerity measures which when implemented will result in millions of dollars saved for other distressed areas in need of monetary stimulus.

Employment costs have taken a marginal increase in relation to revenue collected from last year’s account of 92 percent of total revenue to 96,8 percent (US$1,638 billion) of total revenue between January and June 2016 owing to shrinking revenue flows.

The medium term Public Service Wage Policy target is to reduce the consolidated wage bill, thus the wages and salaries for central government plus wage relocated transfer grant aided institutions.

“Cabinet has already approved Civil Service wage bill rationalisation measures which will reduce the baseline public employment costs by around US$ 118 million by end of 2016. Some of the key wage bill rationalisation measures have since been implemented and are already yielding monthly savings of around US$6,5 million effected January 1, 2016,” Chinamasa said.

Government as of April 1, has also instituted the rationalisation of mobile phone and cellphone allowances and standardisation of fuel benefits for members entitled to personal use.

The proposed austerity measures will see government cut 25 000 jobs by December 2017 which is expected to save US$155 million annually. This is in line with the International Monetary Fund (IMF) Staff Monitoring Programme now the Zimbabwe Recovery Fund which aims at reducing employment costs from the current levels of 96 percent as outlined by the Finance minister to 40 percent of total revenue.

However Cabinet as at this Tuesday revoked the suspension of civil servants bonuses for the next 2 years and cutting down on allowances which had been included in the minister’s statement last week with the view of saving US$180 million.

“It’s definitely a step in the right direction the minister is trying to get little Government resources fit into the huge gaps that needs to be filled. We have to understand that we need to align our national budget to the realities on the ground because there is no way we can put all our money on salaries,” stressed Dr Gift Mugano, an economist.

“We are in full support of the measures to curtail Government expenditure but first of all the minister should really take seriously as a matter of urgency the recommendations from the Auditor General’s report which showed that our public wage bill is heavily infested with ghost workers.

“Second step is to restructure public offices in a way that is cost effective and avoid duplication of duties. Our ministries are congested with some duplicating others. As we go to the National Budget in November the minister needs to do more in rationalising the public service particularly roles such as that of Principal Director in ministries which are just duplicating the role of a permanent secretary,” he added.

Analysts are also critical of the rationalisation process citing that the civil service was actually short of human capital as evident in the shortage of personnel in the country’s education and health sectors but rather point to the contraction of the economy as the main factor.

“Cutting on expenditure without setting a clear trajectory of expanding the economy is suicidal. There is need to grow the national economy to sustainable levels without necessarily trimming the workforce,” said an economist Mr Pepukai Chivoore.

Minister Chinamasa recently said the economy needs to start growing at 9 percent and above for the next decade in order to catch up on its regional peers and ensure employment levels compete.

“We need to work on widening our fiscal space and not just cut on numbers because it’s not enough to make sacrifices without setting the goals. The issue which the midterm fiscal policy failed to clearly speak about is how do we then grow the cake and we are talking about issues to do with how do we raise productivity, incentivise companies who procure locally, accessing credit lines and attract investment.

“We know Minister Bimha (Industry and Commerce) is almost completing our local procurement policy which will help productivity across the manufacturing and supply value chains for local players to participate and expand this contracted economy,” added Dr Mugano.

 

Share This:

Sponsored Links

We value your opinion! Take a moment to complete our survey

This will close in 20 seconds