HomeOpinion & AnalysisColumnistsStop costly budget consultative charade

Stop costly budget consultative charade

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The national budget consultative process is a welcome move because, naturally, eliciting the views of stakeholders is noble.

But there is something disturbing about the whole process.

Like Copac which guzzles more resources through the supposed consultations than what is needed to produce the constitution itself, the budget consultative process appears to gobble a lot of resources yet Treasury has already made it clear that the next budget will only be a mere $2,2 billion because government has no money.

If that is the case, then why should the Ministry of Finance and the Parliamentary Portfolio Committee for Budget and Finance waste a lot of money consulting on a useless budget that cannot fund this economy out of its consumption trap?

While it is true that the consultations are important to inform policy, it is also true that whatever policies will come out of that process need to be implemented with funds.

In fact, a lot of those policies will be dropped because they will fall second fiddle to those that generate funds for the cash-strapped government.

Suppose, business asks government to reduce corporate tax or to scrap or reduce a certain tax in order to promote a certain industry.

Suppose, as well that government in principle agrees that it makes economic sense to do so.

In public finance, the fate of that recommendation depends on its perceived effect on fiscal revenue.

Even if business may argue that the revenue gains would improve with the tax cut in the long run, government is unlikely to bite the bullet because it is faced with revenue constraints now, not in the future.

It stands only to reason that these consultative meetings have in fact degenerated into talk shows the same way as Copac.

Instead of touring the country talking about an unfunded budget, Treasury should be looking for money.

Ideally, a national budget is supposed to technically “massage” the economy, relaxing tense muscles and aid the flow of blood in the system. It technically does so using two instruments, taxation and government expenditure.

Moving taxes up and down has a fiscal effect on the economy, encouraging or discouraging production and expenditure.

Government allocation or expenditure decisions have a similar effect.

At boom government is encouraged to relax spending to cool the economy and in a recession it is urged to stimulate production and demand by increasing expenditure in a targeted way.

Zimbabwe, which has been stuck in the later scenario since last year and is unable to break out of that trap, is busy consulting on an unfunded budget instead of finding ways out of that quagmire.

Isn’t that absurd?

If the truth be told, this economy is not going to grow by the rate that is constantly being thrown up unless Treasury solves the cryptic issue of how to fund its budget.

The national budget is the one which sends policy signals to the economy.

If the signalling system is dysfunctional, then what should the rest of the economic agents do?

The madness must stop.

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