Budget review shows we’re doing it right

THE Mid-Year Budget Review by Minister of Finance and Economic Development Mthuli Ncube in Parliament yesterday was basically good news, with despite the problems the world and Zimbabwe face, Zimbabwe at least is doing better than expected at the end of last year when the Budget being reviewed was set.

For a start Minister Ncube has now pushed his prediction for economic growth this year up a little, from 7,4 percent to 7,8 percent.

Secondly, as the country and the Government are doing well there was no need for any policy changes to the budget. We just have to carry on doing what we were doing and doing it properly: no new taxes, no tax concessions, no dramatic rewriting of the budget. The Budget did predict a small $7,7 billion deficit in the first six months, part of the $30,8 billion deficit the Minister had budgeted for the year. Instead the Government has run a surplus, a small one, but still a surplus of $570 million.

This arose from an increase in revenue over predictions of around $16 billion, split almost equally between more from the taxes and more from the non-tax revenue, largely fees charged by Ministries.

Non-tax revenue is only a small segment of Government revenue, about four percent, but there was an determined effort during the first six months to get these up to cost-recovery levels and adjust for the inflation we saw since the last reviews.

Expenditure rose as well, but it was as a direct result of this extra revenue. About half the extra revenue was used to eliminate the budgeted deficit and create the little surplus. The other half was spent on staff costs and capital development.

The extra spending on staff was partly paying for the extra 3 000 teachers hired and filling the extra 4 713 health posts, and partly by being a little more generous with salary adjustments in January and April. When people complain about staff numbers, they usually mean people sitting in offices. Very few, if any, object to having more nurses and more teachers and the questions here will be more on the lines of did we hire enough new people.

It is perhaps worth stressing that when people criticise the size of the State payroll they do not look at who is being paid. Most ministries are tiny, being policy and co-ordination units with only moderate staff needs.

The overwhelming majority of those on the State payroll teach in schools, look after sick people in hospitals, drive motorbikes around farming areas ensuring that we grow what we need to eat, man our police stations so the peace is kept and the criminals are caught, try and reform those criminals in jail, issue our ID cards, birth certificates and passports, protect our borders, build and repair our roads, and generally do a lot of vital work.

You can argue about how well an individual civil servant does their job, but not really about whether the job is needed. The capital costs rose as the Government was able to do more as it had a bit of extra money, like fix roads in urban areas under its emergency programme as well as complete a bunch of projects in the pipeline.

The critical point to note is that this extra spending was largely discretionary, allowable because it was needed, but also because there was extra money. The other spending changes, and social payments had to rise sharply to more than double what was budgeted because of Covid-19, were funded by juggling expenditure on other items in the usual process of coping with emergencies and minor changes in Government needs during a year.

Minister Ncube was also upbeat about foreign currency. Our current account, what measures the inflows and outflows, will end the year in surplus, lower than last year at US$611,6 million, but still healthy.

Trade will be in deficit as we need to import pricier raw materials and businesses need more capital equipment to expand, but that is more than balanced by rises in other inflows with our diaspora being particularly useful.

Aid inflows from development partners are rising as the Second Republic has sorted out our act, improved relations with just about everyone in the world, and hammered corruption, so partners know their money is being properly spent.

Some people might be startled when looking at the lists to see the USA is easily the largest development partner, but few will find it odd that the health sector is easily the largest beneficiary of these partnerships. The Minister gave in his detailed statement that accompanied the speech details of the ins and outs of economic changes and developments, but generally these tend to balance out. For example, gold is not doing as well as expected, but platinum is doing a lot better.

But his prediction of even better growth is predicated on there being more ups than downs. The harvest was better than expected, mining will contribute more as global prices are rising and output increases, more than balancing the extra we have to spend on fuel.

Manufacturing is pushing ahead fast with capacity utilisation rising, and even tourism, the sector hardest hit by Covid-19, recovering and expected to do better as internal tourism grows. The tourism recovery prediction is built around growing vaccination rates, something that benefits the whole economy, but also on what actually happened in the first six months. The Eastern Highlands tourism industry was not badly hit, and Nyanga actually recorded no drop in bed nights sold, and tourists in that area are almost all local.

As consistently reported, inflation is falling fast, built on the auction system stabilising exchange rates, the Government exercising tight fiscal discipline and the Reserve Bank managing liquidity tightly and making speculation very hard. Generally speaking what Minister Ncube outlined in his review is what we have now come to expect from the Second Republic: competence, doing a bit better than promised, tight adherence to the budget, stability and growth.

And the Minister was eager to make it clear that this success was a team effort involving everyone including President Mnangagwa and all his Cabinet colleagues all pulling together. So as he said: More of the same please.