Uphill battle for Mugabe’s minister without finance
WHEN Zimbabwe’s finance minister, Patrick Chinamasa, presents his midterm fiscal policy review statement early next month it will be a tough sell given the sharp deterioration of the economy.
Investors will be gauging whether the country’s fiscal authorities appreciate the scope of the economic carnage — especially in light of last month’s import restrictions and persistent cash shortages since December making it ever more difficult to do business in the country.
The IMF estimates economic growth at 1.1% — lower than Chinamasa’s revised forecast of 1.4% from 2.7%.
Tendai Biti, Chinamasa’s predecessor, says the economy is in recession and will contract by as much as -3.8% this year.
Chinamasa appears to be fighting a losing battle. There is no financial aid in the offing and the IMF is unmoved by his pleas for cash. Even Harare’s fair-weather friend, Beijing, is silent — despite the initial buzz around the megadeals signed last year with China by President Robert Mugabe.
Zimbabwe’s Treasury is scrounging for cash as companies, its main revenue source, continue to fold in the wake of the prolonged economic crisis. In a recent statement, the Zimbabwe Revenue Authority said it had missed revenue collection targets for the second quarter of 2016 by 3% and collected $867-million (about R11.6-billion).
The dwindling revenues present an even bigger challenge for Chinamasa: how to continue paying the government’s 550 000 public workers, a wage bill which accounts for 90% of monthly revenues, according to Treasury. By contrast, Zambia spends only 60% of revenue on its wage bill.
Chinamasa has vowed to cut the wage bill to around half of government revenue, but this is yet to be followed by action — largely because Mugabe can ill afford to upset public workers, a sizable chunk of the electorate, with the 2018 polls looming.
In a bid to stave off worker unrest, Chinamasa is staggering salary payments for civil servants. The armed forces are paid first and the rest of the public workers later, a strategy economists say is untenable given the fall in revenue.
A Treasury source this week said the midterm fiscal policy review would be presented on September 8 and not in August, as usual.
John Robertson, a Harare-based independent economist, told Business Times this week it was little surprise that the review statement had been pushed back.
“They are struggling to find ways of explaining what’s going on and who to blame. It’s a pity that Chinamasa spends so much time looking for excuses and not for cures,” he said.
The likelihood of Chinamasa announcing sweeping changes was minimal, said Robertson. History had shown that the authorities were averse to backing down on failed economic policies.
“They never want to admit it when they are wrong. Even when President Mugabe changed the indigenisation law, he accused the indigenisation minister of being wrong in his interpretation of the law, but never admitted that the law itself was bad. By now we should have had a repeal of the law to show sincerity to investors, yet we don’t.”
An executive at the Zimbabwe Stock Exchange, who declined to be named, said the midterm fiscal policy review statement was closely followed by the local bourse.
“We make recommendations to the government and we want to see whether our input is taken into consideration. From the capital side we want to see reduced transaction costs, so as to reduce costs incurred by investors.”
Rashweat Mukundu, chairman of the Zimbabwe Democracy Institute, said Chinamasa “is a finance minister with no finances at all and hence not much to do”.