Zimbabwe budget a test of wits for economist Ncube

Thursday November 14 2019

ncube

Zimbabwe Minister of Finance and Economic Development Mthuli Ncube. He reads the Zimbabwe national budget for 2020 on Thursday, November 14 with stabilising the currency and attracting investments top priorities. Analysts warn that heavy defence spending and fiscal indiscipline could undermine economic recovery. PHOTO | FILE | NATION MEDIA GROUP. 

By The EastAfrican

When renowned economist Mthuli Ncube accepted the job of Finance minister a year ago, he pleaded with Zimbabweans to start judging him after six months.

Professor Ncube, a Cambridge trained economist and former African Development Bank vice president, was among a couple of technocrats brought in by President Emmerson Mnangagwa after last year’s elections to resuscitate a faltering economy.

President Mnangagwa, who took over from long time ruler Robert Mugabe in November 2017 following a military coup, was desperate for a magic bullet to cure Zimbabwe’s economic malaise and the former banker appeared the perfect fit.

Prof Ncube immediately mended relations with multilateral lenders such as the World Bank and International Monetary Fund (IMF).

He helped Zimbabwe run a budget surplus for the first time in a decade and stopped printing money, which had in 2008 led to record hyperinflation and subsequent collapse of the local currency.

By June this year, Zimbabwe had ended a decade of dollarisation and the implementation of a raft of economic well-meaning but largely ineffectual reforms, culminating in the issuance of new Zimbabwe dollar notes on Monday, was in full swing.

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But that is as best as it got with the rosy picture not obfuscating the battering the economy was receiving from drought, commodity and power shortages.

Inflation is officially at 300 per cent but independent analysts suggest it is upwards of 500 per cent while electricity is rationed for18 hour daily.

Fuel, bread and medicines come at a premium and the local currency has lost value six times against the US dollar to 15.6 units compared to 2.5 units at introduction in February.

Hardly the backdrop Prof. Ncube would have chosen to preamble his second budget on Thursday November 15 as he seeks to restore confidence in the economy.

Having declared austerity measures that have stoked unrest in the civil service over, Prof, Ncube will be looking to bolster service delivery including by doctors who have been on strike since September demanding their salaries be pegged to US dollars.

A morale boosting thirteenth cheque for public servants is among items affected by the cash crunch as it will be paid in three instalments from this month. Previously it was paid lump sum.

The 2020 budget will be capped at ZW$28.5 billion ($1.8 billion), adjustable upwards by 30 per cent to factor in inflation, meaning generating revenue rather than directing spending will be his key task.

That will require consolidating the reforms as a foundation to creating jobs and bolstering private sector confidence to attract new investments.

He does not expect a quick fix saying the Zimbabwe dollar, for instance, will take at least two years to stabilise.

"We have to make sure that the domestic currency can return value, is very stable. That will build confidence and then markets will move away from US dollar pricing. Usually that takes two years or so,” he said.

Zimbabwe ended a decade of dollarisation in June and re-mtroduced its own currency, spawned runaway inflation.

Queues at banks are getting longer as Zimbabwean's seek to secure the $300 weekly withdrawal limit, a pittance given that a loaf of bread (500 grams) costs between $1 and $1.60.

The country's economic growth is projected at sub-zero rates following a severe drought and a catastrophic cyclone that killed hundreds and destroyed infrastructure in the eastern part of the country.

“The best we can hope for is a stable exchange rate but there is not much to show that will happen,” said John Robertson, an economist.

Zimbabwe Congress of Trade Unions secretary general Japhet Moyo, however, sees wrong priorities and fiscal indiscipline as the key risks to the success of the Finance Minister's plans.

"As usual, I foresee the priorities being the security sectors and few resources going to social services and infrastructure. Most ministries will overspend and fail to account for their expenditures,” said Moyo.

A pre-budget document seen by Africa Review bears out these fears with the army and the police poised to get the lion's share of the budget.

Prof. Ncube has defended this saying happy barracks and law enforcement quarters are key to peace and stability.

"On the security cluster, a decent three meals a day, a decent uniform and liveable housing are essential. We want to deal with that," Prof. Ncube said.

Defence minister Oppah Muchinguri-Kashiri said at a recent pre-budget seminar that the country's soldiers were ill equipped and frequently run out of rations to an extent that they cannot host exchange programmes with their peers.

Despite the pre-budget brief getting input from Parliament and industry, there have been suspicions that President Mnangagwa is rewarding the military which was instrumental in bringing him to power.

Army commander Constantino Chiwenga, who led the coup against Mugabe over the economic collapse, is now one of the vice presidents while a number of generals are ministers or top bureaucrats.

“I know the issues well," Prof. Ncube said of the competing resource needs.

Zimbabweans pray he strikes a fine balance on Thursday, especially between political expediency and the immediate needs of the country's 16 million people.  

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