Better prospects await 2019

THE year 2018 has been an extremely difficult year, having been characterised by price spikes coming on the back of the high exchange rate from the parallel market. These rates have eroded household income by four times.

The root causes of the inflationary pressures are budget deficits and trade imbalances.

The budget deficits have seen Government issuing Treasury Bills amounting to $7,6 billion, which were the chief contributor to Real Time Gross Settlement (RTGS) values estimated at $10 billion.

The excessive RTGS balances have created serious disparities between the cash balances and total deposits.

So, the rates we are seeing today are as a result of these disparities.

With respect to trade deficits, the country has been importing more than it is exporting.

In the last ten years, we have a cumulative trade deficit of $30 billion, which effectively mopped out money from market. The ideal situation is to export more than we are importing so that we build foreign exchange reserves.

With this context, what makes this writer to believe that 2019 will be better than 2018?

Central to my belief are the policy measures which have been put together by Government to deal with the twin problems; that is, trade deficits and budget deficits.

Central to these policies is the 2019 National Budget statement.

The Minister of Finance and Economic Development, Professor Mthuli Ncube, came up with key policy measures which are aimed at closing the tap on budget deficits, as well as reducing trade deficits which include the following:

◆ Introduction of a 5 percent cut on basic salary which will be effected for all senior positions from Principal Directors, Permanent Secretaries and their equivalents up to Deputy Ministers, Ministers and the Presidium. This is also extended to basic salaries of those in designated posts in State Owned Enterprises (CEOs, Executive Directors and equivalent grades), including Constitutional Commissions and grant aided institutions.

◆ Computation of the civil servants bonuses based on Basic Salary only (excluding housing and transport allowances).

◆ Rationalisation of Foreign Service Missions with a view of reducing the number of Foreign Missions.

◆ Retirement of Youth Officers, Government will retire 2 917 Youth Officers by end of December 2018 and retirement of officials who reached 65 years.

◆ Biometric Register for Civil Servants in 2019 aimed at flushing out ‘+70,000’ ghosts workers.

◆ Introduction of payment of customs duty, VAT and surtax on motor vehicles with a view of redirecting use of scarce foreign currency to the productive sectors of the economy.

◆ Payment of tax in the currency of trade will help the Government to mobilise foreign exchange for critical requirements.

◆ Introduction of intermediated transfer tax of 2 percent is expected to generate more than $3 billion and help the Government in paying the debt as well as meeting budgetary requirements.

◆ Introduction of payment of duty in foreign currency for selected agricultural and manufactured products is going to force companies to support local production and substitute imports.

◆ In order to uphold the principle of transparency and accountability in the utilisation of public resources, Government Ministries and Departments will be required to remit all revenue collected into the Consolidated Revenue Fund, with immediate effect.

◆ In dealing with the violation of the Penalties under the Public Finance Management Act, the Government is working on Penalties for financial misconduct by public officers range from fines, to imprisonment, or both. This move will help in reining bad behaviour in Government and wastefulness which has seen $2.5 billion budget deficit which was spent in 2018 coming on the back of unbudgeted expenditure. If Government fully implements these measures, there is no doubt that we will see stabilisation of prices and financial sector at large in the course of 2019.

However, if we go back to the same old story of failing to walk the talk, 2019 will be the worst.