Mthuli Ncube: We are mending an economy which we inherited in dire straits
By Professor Mthuli Ncube
As Minister of Finance, I often feel frustrated that we don’t live in a perfect world with perfect conditions. So many factors are out of our control; from natural disasters, to global events; from oil prices to the outbreak of disease. We are also in a democracy with lots of decision-makers. We operate in bureaucracies which take time for the wheels to turn.
Yet we have a challenge on our hands which needs dealing with, and quickly. We are mending an economy which we inherited in dire straits. Even when all the right policies are being implemented; even when all the political will for economic reform is present; even when Zimbabwe is opening up to the world; rebuilding our devastated economy will take time.
The most important thing is that the train of sensible economics is firmly back on the tracks. We no longer spend more than we earn; the first rule of any economic entity, be it a person or a country. Balancing the budget is imperative. This is perhaps our greatest achievement to date. It is neither painless nor smooth; but reforming and rebuilding never is.
The last six months have seen us launch deep and broad policy reforms under the banner of our Transitional Stabilisation Programme (October 2018-December 2020).
The Transitional Stabilisation Programme (TSP), essentially, targets a number of areas for reform, that are key to providing a foundation for strong, shared and sustainable growth and development. These include: Macro-fiscal stabilisation; building a conducive investment environment and launching quick-wins to stimulate and sustain a renewed private sector-led growth economy; reintegrating the country into the global economy; and the promotion of sound and good governance as an essential ingredient for socio-economic cohesion and development.
The short-term effect is unfortunately an austerity felt by all. The long-term effect, with a mixture of discipline and patience, will be more money your pockets, more jobs, and an economy back on its feet. While politicians live from day to day, economics is a long-term game; one must look at the bigger picture.
The implementation of the TSP reforms, with its long-term focus, has indeed begun in earnest. Notwithstanding setbacks from downside risks related to drought conditions and Cyclone Idai, foreign currency shortages, restricted access to international financial markets, and other exogenous factors, there are indeed noticeable scores from the reforms.
Evident successes are in fiscal consolidation and discipline, the removal of various pricing distortions, monetary sector and currency reforms, infrastructure rehabilitation, and “Doing Business Environment reforms” which will attract investment.
As a result, growth, which could have declined by much higher margins, was saved and is now estimated at 4 percent for 2018, only slightly behind our ambitious target of 4,5 percent.
The anticipated growth was driven mainly by agriculture, mining and services on the back of improved confidence and new investment in both private and public sectors during the first half of the year.
With the macro-fiscal stabilisation measures at the heart of the TSP, which were again further buttressed through the 2019 National Budget austerity measures, performance of public finances has started improving with budget deficits being contained from October 2018.
By December 2018, an incredible budget surplus was recorded according to the preliminary budget outturn. We are spending less and raising more, Economics 101.
Revenue collections during the fourth quarter of 2018 stood at US$1,69 billion, already surpassing the set target of US$1,18 billion by a massive 43 percent. This fourth quarter performance also represents a phenomenal 60 percent increase from the collections of US$1,06 billion recorded during the same period in 2017. While this is still part of a wider “hole” filling process; it is progress.
Similarly, fourth quarter revenues surpassed third quarter revenues of US$1,3 billion by 31 percent, reflecting high inflation impact, as well as the introduction of the Intermediated Money Transfer Tax (IMTT) in November. These revenues have already been put to good use as part of our rescue and rehabilitation efforts for Cyclone Idai.
While it would have been preferable to put these funds to long-term strategic reforms, Government has an immediate responsibility to protect its citizens, and when the natural disaster struck, we had to step in with tactical measures.
We must keep focus. We have much more work to do. Expenditure needs to be reined in. Privatisation kick-started. And crucial foreign funding injected into our economy. We must also continue to do all in our power to remove the crippling sanctions which continue to hold back our development.
We are in a process of rebuilding; and the reforms are well and truly underway. While too many Zimbabweans still suffer, and while many are still frustrated; with patience and discipline, we will get to the economic promised land. Zimbabwe is slowly finding its feet. The journey is long, and it will not be smooth, but we are heading firmly in the right direction.
Professor Mthuli Ncube is the Minister of Finance and Economic Development