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The great deception

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Stir The Pot :Paidamoyo Muzulu

IT’S now a week since Finance minister Mthuli Ncube presented his midterm budget review statement — a presentation that many had looked forward to with so much expectation, but turned out to be more froth than beer. Many were left wondering whether we are progressing or regressing economically.

In January, Ncube presented a $63 billion 2020 budget which was duly passed by Parliament. It was a budget that was minimal in capital expenditure and long on curtailing government recurrent expenditure.

Many economists praised it for its fiscal consolidation and returning the country to a recovery trajectory.

The original budget was based on a range of economic premises, namely privatisation of State-owned enterprises, re-engagement with international financial institutions (IFIs), a freeze on recruitment and what was said to be a short but sharp austerity measures.

Ncube, a former African Development Bank and died in the wool neoliberal, took the opportunity to implement Milton Friedman’s shock doctrine. His technocratic credentials initially gave him the advantage to be allowed to experiment, but not long before Zanu PF started getting worried about potential loss of votes in the forthcoming 2023 general elections. The poor had started squealing but the rich were getting super-rich.

The government, in line with Ncube’s reasoning, stopped recruitment of nurses and teachers — the backbone of public services (heath and education). This development is typical measures of Friedman’s economics — deep cuts on social spending. It is a measure that comes with twin objectives; reducing State recurrent expenditure and at the same time creating space for private healthcare and education investments.

Ncube appears to have made progress on privatisation health and education, thanks to the COVID-19 pandemic. Zimbabwe witnessed Sakunda Holdings spreading its wings into private healthcare through acquisition of St Annes and Rock Foundation Medical Centre. The long-forgotten Ekusileni Hospital in Bulawayo was fast-tracked into a COVID-19 medical institution.

A dubious firm, Drax International, in the process landed itself a lucrative US$60 million drugs and medical procurement deal.

The 2020 budget was initially crafted when the exchange rate was artificially at 1:1 with the greenback. It was further developed on the basis of a targeted 20% inflation by year end and a revival of exports. These last three premises have been found to be a fallacy — the local currency has spectacularly fallen in value and now trading at 72:1 officially (and a mammoth 110:1 on the parallel market). The COVID-19 pandemic has further dealt a blow to international trade after air traffic was reduced to nearly zero and most countries implemented hard lockdowns to combat the spread of the pandemic.

This shift in the fundamentals on the ground meant the midterm budget was to factor in all the afore-mentioned changes, including the 770% annual inflation rate. At the onset of the COVID-19 pandemic, Ncube announced a $600 million social safety net fund, a temporary recruitment reprieve in health and education sector and a further $18 billion economic rescue package.

In April, Treasury reviewed civil servants’ salaries. A further review (50%) increment and a US$75 across the board COVID-19 allowance was introduced in June. These facts point in one direction — the midterm budget should have come with new global budget figures.

Something does not add up. Mthuli argued he could not increase the size of the budget because ministries had not exhausted drawing on their budget vote allocation in the first half of the year. This was a fib. The reality is no disbursements were done.

Ncube has become a master of deception, creative with figures and painting a rosy picture of any otherwise gloomy situation. In the first six months of the year, the government has been on a borrowing spree. It was auctioning Treasury Bills (TBs) like confetti at a wedding. The financial institutions and pensions funds have now lost appetite of the TBs as their returns are far way below inflation and thus a bad investment. It means the government is now borrowing from somewhere.

The reengagement efforts with IFIs have fallen hard on their face. Zimbabwe more than ever now depends on donor/development community for its public health needs and food security. The British, Americans, European Union and Chinese have taken the lead in giving humanitarian assistance in a country that always brags of phantom budget surpluses. Zimbabwe is now a basket case, relying on donors not only to feed her people but also take care of them when ill.

Why the great deception? The Zanu PF regime (in both manifestations under the late Robert Mugabe and his successor Emmerson Mnangagwa) has perfected the art of doing financial transactions off the book. One perfect summer after the 2023 polls, Zimbabweans like last year will wake up to another billion dollars debt contracted without parliamentary approval.

The deception, like morning dew, will be exposed in the coming days and Ncube’s competency further scrutinized, but it may be too late then for any remedy. Parliament must step up to the plate and hold the regime to account. Someone should definitely tell where the funding for salary reviews came from and whether the $18 billion economic stimulus package was fake or real. The financial smokes and mirrors’ game should stop.

In January, Ncube presented a $63 billion 2020 budget which was duly passed by Parliament. It was a budget that was minimal in capital expenditure and long on curtailing government recurrent expenditure.

Many economists praised it for its fiscal consolidation and returning the country to a recovery trajectory.

The original budget was based on a range of economic premises, namely privatisation of State-owned enterprises, re-engagement with international financial institutions (IFIs), a freeze on recruitment and what was said to be a short but sharp austerity measures.

Ncube, a former African Development Bank and died in the wool neoliberal, took the opportunity to implement Milton Friedman’s shock doctrine. His technocratic credentials initially gave him the advantage to be allowed to experiment, but not long before Zanu PF started getting worried about potential loss of votes in the forthcoming 2023 general elections. The poor had started squealing but the rich were getting super-rich.

The government, in line with Ncube’s reasoning, stopped recruitment of nurses and teachers — the backbone of public services (heath and education). This development is typical measures of Friedman’s economics — deep cuts on social spending. It is a measure that comes with twin objectives; reducing State recurrent expenditure and at the same time creating space for private healthcare and education investments.

Ncube appears to have made progress on privatisation health and education, thanks to the COVID-19 pandemic. Zimbabwe witnessed Sakunda Holdings spreading its wings into private healthcare through acquisition of St Annes and Rock Foundation Medical Centre. The long-forgotten Ekusileni Hospital in Bulawayo was fast-tracked into a COVID-19 medical institution. A dubious firm, Drax International, in the process landed itself a lucrative US$60 million drugs and medical procurement deal.

The 2020 budget was initially crafted when the exchange rate was artificially at 1:1 with the greenback. It was further developed on the basis of a targeted 20% inflation by year end and a revival of exports. These last three premises have been found to be a fallacy — the local currency has spectacularly fallen in value and now trading at 72:1 officially (and a mammoth 110:1 on the parallel market). The COVID-19 pandemic has further dealt a blow to international trade after air traffic was reduced to nearly zero and most countries implemented hard lockdowns to combat the spread of the pandemic.

This shift in the fundamentals on the ground meant the midterm budget was to factor in all the afore-mentioned changes, including the 770% annual inflation rate. At the onset of the COVID-19 pandemic, Ncube announced a $600 million social safety net fund, a temporary recruitment reprieve in health and education sector and a further $18 billion economic rescue package.

In April, Treasury reviewed civil servants’ salaries. A further review (50%) increment and a US$75 across the board COVID-19 allowance was introduced in June. These facts point in one direction — the midterm budget should have come with new global budget figures.

Something does not add up. Mthuli argued he could not increase the size of the budget because ministries had not exhausted drawing on their budget vote allocation in the first half of the year. This was a fib. The reality is no disbursements were done.

Ncube has become a master of deception, creative with figures and painting a rosy picture of any otherwise gloomy situation. In the first six months of the year, the government has been on a borrowing spree. It was auctioning Treasury Bills (TBs) like confetti at a wedding. The financial institutions and pensions funds have now lost appetite of the TBs as their returns are far way below inflation and thus a bad investment. It means the government is now borrowing from somewhere.

The reengagement efforts with IFIs have fallen hard on their face. Zimbabwe more than ever now depends on donor/development community for its public health needs and food security. The British, Americans, European Union and Chinese have taken the lead in giving humanitarian assistance in a country that always brags of phantom budget surpluses. Zimbabwe is now a basket case, relying on donors not only to feed her people but also take care of them when ill.

Why the great deception? The Zanu PF regime (in both manifestations under the late Robert Mugabe and his successor Emmerson Mnangagwa) has perfected the art of doing financial transactions off the book. One perfect summer after the 2023 polls, Zimbabweans like last year will wake up to another billion dollars debt contracted without parliamentary approval.

The deception, like morning dew, will be exposed in the coming days and Ncube’s competency further scrutinized, but it may be too late then for any remedy. Parliament must step up to the plate and hold the regime to account. Someone should definitely tell where the funding for salary reviews came from and whether the $18 billion economic stimulus package was fake or real. The financial smokes and mirrors’ game should stop.

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