Government has sabotaged Finance minister Patrick Chinamasa’s reform measures by overturning his proposals to cut salaries and suspend bonuses for civil servants, a move analysts say will affect investor confidence on the economy.
Source: Govt U-turn sinks Chinamasa reforms – NewsDay Zimbabwe September 15, 2016
BY NDAMU SANDU
In his mid-term fiscal policy review last week, Chinamasa proposed a raft of reforms that include cutting 25 000 government jobs, slashing salaries for senior civil servants and suspending bonuses for at least two years.
But in a statement on Tuesday, government spokesperson Chris Mushohwe said Cabinet had thrown out Chinamasa’s proposed cost-cutting measures relating to the civil service.
Economist Prosper Chitambara told NewsDay yesterday that the U-turn was a classic case of policy inconsistences, which affected confidence and credibility of government.
“It means government is not united. When the people are divided, the house cannot stand,” he said.
Ironically, Chinamasa’s mid-term fiscal policy statement had a theme Improving Investor Confidence to Enhance Productivity.
Former Finance minister Tendai Biti said the U-turn showed there was no reform agenda on the table for Zanu PF.
He said before fiscal policies were issued, they would have passed through the Cabinet committee on Economic Affairs.
“Because politics matters, someone would have gone to President Robert Mugabe to say you are finished if government fails to pay bonuses. They [Zanu PF] have dumped Chinamasa” Biti said.
He said the latest developments “prove that re-engagement is a waste of time” and Zanu PF “has failed to run the economy”.
Zimbabwe is re-engaging with international financial institutions and has promised to clear its combined $1,8 billion debt to the three preferred creditors — the International Monetary Fund, World Bank and the African Development Bank — as the first step to extinguish the country’s over $10bn external debt.
Chinamasa revealed last week that the government wage bill was now gobbling a whopping 96,8% of total revenue.
In the first half of the year, government had a budget deficit of $623 million financed by borrowing from the domestic market.
Chinamasa warned that if expenditure was not contained, the budget deficit would surpass $1bn by year end.
So tough has been the situation that government has been struggling to service the domestic debt, resulting in roll-overs, which Chinamasa said posed financial risks on domestic debt instrument holders and domestic financial institutions.
Chitambara said increased borrowing on the domestic market “will affect sustainability and stability of the financial sector”.
Another economist John Robertson concurred with Chitambara, adding government has been struggling to settle Treasury Bills, which was “a dangerous situation because you have no success selling new Bills”.
A banker also said yesterday “it would have been easy for a camel to enter through the eye of a needle than for government to remove bonuses for the civil servants”, as the Zanu PF government officials “are masters of populism”.
Zanu PF, when cornered, is known for making populist policies to gain the support of key constituencies.
Yet Chinamasa could be paying the price for behaving like the Bourbons “who learnt nothing and forgot nothing”, as there are some terms which have been banished from the Zanu PF vocabulary.
First, it was devaluation, then quasi-fiscal activities, and now, reforms, viewed as leaning to the West.
When former Finance minister Simba Makoni called for devaluation of the Zimbabwean dollar in 2002, he was labelled a saboteur by Mugabe, opening the floodgates of attacks from Zanu PF colleagues.
Businessman Phillip Chiyangwa told The Standard then that Makoni’s actions were “tantamount to a departure from the promises Zanu PF made during the campaign and this is why he received a vote of no-confidence from the party.
“Immediately after the elections, the man went for devaluation of our currency and from then onwards, it became a priority for him, yet it was not on the Zanu PF agenda. The new thinking in Zanu PF cannot allow for someone who is so detached from the people.”
In 2006, then Finance minister and former diplomat, Herbert Murerwa, got the flak when he called for the end of quasi-fiscal activities, which would, in later years, fuel hyperinflation and kill the local currency.
All hell broke loose.
Addressing traditional leaders in Lupane, Mugabe responded, blasting what he called “bookish economics”.
“They have this word they like using, ‘quasi, quasi, quasi’. But I tell them that this is the expenditure that we need. We are under sanctions and there is no room for the type of bookish economics we have at the Ministry of Finance,” he said back then.
A mini reshuffle some months later claimed the scalp of Murerwa. Ten years later, another Finance minister is under attack for doing what is good for the economy.