via Chinamasa faces daunting task | The Herald December 19, 2013 by Happiness Zengeni
FINANCE and Economic Development Minister Patrick Chinamasa will today present the 2014 National Budget, which is expected to be “short on the money and long on policy”. The Budget will be presented against a backdrop of a severe liquidity crunch as a result of declining money supply growth, depressed foreign capital inflows, low competitiveness and huge external debt overhang.
Economic analysts say this gives Government little room to manoeuvre and one of the best solutions would be to formulate a Budget that will adjust policies that have been a deterrent to investment.
Considering the resource constraints in the current environment, sources within the Finance Ministry told The Herald that the Budget itself was a no-brainer on the expenditure and revenue side.
“The Budget will have less on money and what he will do with it, but it will be more on the policies to be put in place to kick-start economic recovery. The policies will be the building blocks which will be used to hold the foundation for the Zimbabwe Agenda for Sustainable Socio-Economic Transformation blueprint,” said the sources.
Minister Chinamasa has in the past said the Budget thrust will be giuided by Zim-Asset, a plan that seeks to reverse the slowdown and reposition the economy on a sustainable growth trajectory.
Economists predict that expenditure will come in at about US$4 billion, the bulk of which is recurrent.
Markets analyst Jerome Negonde said that given the limitations of the country’s fiscal space, a comprehensive public recurrent expenditure review must now pre-occupy Zimbabwe’s policymakers in order to free more resources.
However the biggest challenge on expenditure is on whether or not the revenue side will match expenditure, especially in light of the fact that the tax base is shrinking both at individual and company level.
As a result analysts predict that there will be a deficit on the Budget of around US$600 million.
“The budget will follow the pattern it has followed for the last three years as nothing has happened since the July 31 elections to cause a major shift in the economic environment,” said one of the sources, adding that although the liquidity situation had worsened in the last four months, the quantum and effect of it had been exaggerated.
Since the elections, the country has yet to fully refocus on economic matters with debate seemingly stuck on political issues despite attempts by Government to shift attention to Zim-Asset.
That economic blueprint will steer Zimbabwe’s economic and social development from 2013 t0 2018 and is premised on ZANU-PF’s winning July 31 election manifesto.
After having taken in submissions from sectors such as banking, agriculture, industry and commerce, Minister Chinamasa has the opportunity of squeezing the goodwill out of a peaceful election to formulate a Budget that have promised much in letter but often delivered less than expected on the ground due to a combination of inadequate implementation, lack of financing and low buy-in from the relevant sectors.
Economist Mr Robert Kachidza said Minister Chinamasa should use the Budget to create an environment that will promote meaningful partnerships between Government and the private sector.
Minister Chinamasa is expected to provide clarity on the situation in the financial services sector with regards to the assumption of the Reserve Bank of Zimbabwe’s US$1,3 billion debt, and the demonitisation of hundreds of thousands of Zimbabwe dollar accounts.
“People expect the issue around Zim dollar accounts to be addressed in the statement but perhaps the only problem is on how much they give to the accounts,” said Mr Kachidza.
The experts say it is clear that there is urgent need to inject capital and to attract foreign direct investment, and Minister Chinamasa will have to properly lay out strategies and policies on what type of investors will come in and under what terms.
Since his appointment, Minister Chinamasa has been in consultations with the African Development Bank, the Bretton Wood institutions and various similar lending bodies.
From the discussions he has committed to tell a new policy story for the country with the spirit of re-engagement with those who were either hostile to the country, or did not quite understand its policy trajectory.
Analysts said that the first Budget for any minister is very important as it serves as a barometer on where he wants to take the economy in the next five years.
Needless to say, Minister Chinamasa has his work cut out for him.