Chinamasa measures will cure symptoms

via Chinamasa measures will cure symptoms – NewsDay Zimbabwe August 1, 2015

FINANCE minister Patrick Chinamasa’s series of austerity measures contained in his Mid-Term Fiscal Review delivered on Thursday were another shot at symptoms rather than curing the underlying causes of the economic collapse that has long reached crisis levels.

Chinamasa indicated that the government plans to cut its wage bill to 40% of total revenue from the current unsustainable 80%.
This would entail a substantial cut in the number of government employees in the coming few months.

The government is already struggling to pay civil servants on time because its revenue base has been shrinking with the collapse of the formal economy and the bludgeoning import bill.

Chinamasa bemoaned the fact that the 554 000 civil servants’ salaries gobbled 83% of the government’s $2 billion costs, leaving very little for capital projects.

Job cuts in the civil service could come as early as before the end of the year judging by the timelines given in the Mid-Term Fiscal Review.

The minister’s review of the 2015 National Budget also had other painful surprises especially for the millions that have been forced into the informal economy by company closures.

It introduced a ban on the importation of second-hand clothes and shoes that have become a source of survival for thousands, who sell from cars and flea markets across urban centres in the country.

Chinamasa said the ban was motivated by concerns that second-hand clothing posed health risks to Zimbabweans.

Last week, Matabeleland South MP Priscilla Misihairabwi- Mushonga had appealed to the minister in the National Assembly to protect women from the importation of second-hand underwear, which she felt was degrading and posed a serious health risk.

Chinamasa’s predecessor Tendai Biti once introduced a statutory instrument banning the importation of second-hand underwear, but this did not stop the influx.

Zimbabwe’s borders are porous, which means that the ban on importation of second-hand clothing and shoes could be noble but would not translate into the protection of consumers.

Chinamasa also increased surtax on imported second-hand vehicles of five years and older to 35% from 25% to reduce the import bill and protect the local automobile industry.

However, such measures do not take into account the fact that locally-assembled vehicles are too expensive for the local market where finance schemes for buyers are limited or too expensive.

Chinamasa’s other plan to shore up government revenues was to tax church-related businesses.

The proposal has been on the table for a while and has been widely rejected by churches who argue that they already fill the void left by the government in funding health and education, among other critical sectors.

Looking at the bigger picture, the decision to target churches show that Chinamasa and the government are at the end of their wits as far as the resuscitation of the economy is concerned.

The austerity measures are only meant to stop the bleeding instead of healing the festering wound.

Zanu PF knows what it needs to do to stop the slide into economic ruin, but the party does not seem ready to make the tough decisions.

Vice-President Emmerson Mnangagwa spelt out clearly everything Zimbabwe needs to do to rescue the economy, which includes, according to his own words, biting the bullet and admitting that most of our policies can only lead us into a hell hole.

The fiscal space for Chinamasa would continue to shrink as long as Zimbabwe’s policies are hostile to foreign investment, corruption is left unchecked and President Robert Mugabe has a bloated Cabinet.

Mugabe should have demonstrated his government’s decision to reduce wasteful expenditure by trimming his Cabinet to align it with the size of the economy.

Chinamasa would be back with more austerity measures in the 2016 National Budget because he has not done anything to cure the underlying causes of the shrinking national purse.