Business / Economy
Chinamasa roasted on his gloomy mid-term budget review
23 Jul 2017 at 06:37hrs | Views
Former Economic Planning minister Tapiwa Mashakada could not contain his anger after Finance minister Patrick Chinamasa delivered a gloomy mid-term budget review last Thursday.
Mashakada immediately authored a stinging review of the statement. Chinamasa had taken Zimbabweans for a ride, again, he said.
"From the fiscal review statement, it is clear that government is clueless on how to stimulate production and economic growth," Mashakada told Standardbusiness.
He said Chinamasa's statement promising an economic boom after a good 2016/7 agriculture season was silent on many pressing economic issues for it to be taken seriously.
"Nothing was mentioned about domestic and foreign direct investment performance," Mashakada added. "The review skirted the issue of corruption.
"The word was never mentioned, not even once, yet the country is infested with the corruption cancer."
Corruption has been identified as one of the biggest impediments to economic revival in Zimbabwe by the government and economists.
Auditor-General Mildred Chiri recently released three reports highlighting the extent to which graft had paralysed state-owned companies.
Senior government officials have also been caught with their fingers in the till, while others manipulate tenders to the detriment of the economy.
Chiri said government departments had failed to account for some of its expenditure, including over $500 million in loans.
Mashakada said besides the pervasive corruption, Chinamasa should have addressed the worsening cash shortages that had stalled economic progress.
"We were also surprised that the minister did not make any policy pronouncements on the current cash shortages and liquidity crunch, which is threatening the recovery of the economy," the MDC-T economic policy guru added.
"Quite frankly, Chinamasa's 2017 annual budget review statement showed that government is going round in circles and with factional wars taking centre stage, the current cabinet is dysfunctional."
Mashakada said the minister also owed Zimbabweans answers on the controversial command agriculture programme, which contributed to the massive 2016 budget overrun of $1 billion.
Economist Prosper Chitambara was also not impressed by Chinamasa's statement, saying it raised more questions than answers.
"The prognosis of the budget and the economic outlook do not look good as the country is approaching elections next year," he said.
"There is going to be a lot of pressure on the expenditure and this will result in the budget widening and it will also affect the domestic debt as government has basically been borrowing money to finance itself and this has actually been crowding the expenditure."
Renowned economist John Robertson said the touted growth in agriculture alone would not rescue Zimbabwe's economy.
"Imports are still required to get the industry going; imports are needed to try to restore local production machinery for the local manufacturers and there is also need for foreign currency to pay for the imports," he said.
"There is need for packaging machinery and there is need to purchase raw materials because agriculture is not fully restored as it depends on the farms to supply the whole value chain.
Zimbabwe National Chamber of Commerce CEO Christopher Mugaga said the budget overrun, highlighted in Chinamasa's statement was bad for business.
"The issue of [the growing] domestic debt will crowd out any potential investment from the private sector, erode investor confidence and this will make the cost of borrowing high," he said.
"I think the budget outturn is depressing because the figures, which were being presented, are not very attractive."
He, however, said the budget review should have also touched on the special economic zones and the specific benefits.
"We would have expected the minister to delve into the issue of special economic zones and give a structure of what the benefits are for investing in these zones.
He added that industry wanted the minister to address or update the nation on the cash challenges prevailing on the market.
"The minister could have spoken about cash shortages and bond notes available in the country as some of the money is now being found outside the country. Cash shortages were not discussed in the economic review, but this is one of the drivers of the industry. The minister should also update us on the progress on the bond note facility and the trend going forward," he said.
Chinamasa said the public service wage bill continued to be a huge drain on the fiscus.
"For example, the education budget, including allocations towards ensuring availability of the education service providers, that is 148 449 teaching staff in our primary and secondary schools as well as tertiary institutions, absorbed $1,11 billion during 2016, this notwithstanding that both primary and secondary schools across the provinces continue to experience high teacher-pupil ratios," he said.
Mugaga said the government needed to look at new ways to expand its revenue base in line with the current economic trends.
"The wage bill is not as big as we think but what makes it big is the narrow budget," he said.
"The problem is not the budget overrun, the country's foreign direct investment is as low as $300 million. how do we fund the expenditures where the money goes only to salaries and wages? The issue is to expand our revenue base."
Despite the continuous economic challenges faced by the country, Chinamasa said he was optimistic that the economy was on the rebound, projecting a gross domestic product growth rate of 3,7% this year against 0,7% achieved last year.
Mashakada immediately authored a stinging review of the statement. Chinamasa had taken Zimbabweans for a ride, again, he said.
"From the fiscal review statement, it is clear that government is clueless on how to stimulate production and economic growth," Mashakada told Standardbusiness.
He said Chinamasa's statement promising an economic boom after a good 2016/7 agriculture season was silent on many pressing economic issues for it to be taken seriously.
"Nothing was mentioned about domestic and foreign direct investment performance," Mashakada added. "The review skirted the issue of corruption.
"The word was never mentioned, not even once, yet the country is infested with the corruption cancer."
Corruption has been identified as one of the biggest impediments to economic revival in Zimbabwe by the government and economists.
Auditor-General Mildred Chiri recently released three reports highlighting the extent to which graft had paralysed state-owned companies.
Senior government officials have also been caught with their fingers in the till, while others manipulate tenders to the detriment of the economy.
Chiri said government departments had failed to account for some of its expenditure, including over $500 million in loans.
Mashakada said besides the pervasive corruption, Chinamasa should have addressed the worsening cash shortages that had stalled economic progress.
"We were also surprised that the minister did not make any policy pronouncements on the current cash shortages and liquidity crunch, which is threatening the recovery of the economy," the MDC-T economic policy guru added.
"Quite frankly, Chinamasa's 2017 annual budget review statement showed that government is going round in circles and with factional wars taking centre stage, the current cabinet is dysfunctional."
Mashakada said the minister also owed Zimbabweans answers on the controversial command agriculture programme, which contributed to the massive 2016 budget overrun of $1 billion.
Economist Prosper Chitambara was also not impressed by Chinamasa's statement, saying it raised more questions than answers.
"The prognosis of the budget and the economic outlook do not look good as the country is approaching elections next year," he said.
"There is going to be a lot of pressure on the expenditure and this will result in the budget widening and it will also affect the domestic debt as government has basically been borrowing money to finance itself and this has actually been crowding the expenditure."
Renowned economist John Robertson said the touted growth in agriculture alone would not rescue Zimbabwe's economy.
"Imports are still required to get the industry going; imports are needed to try to restore local production machinery for the local manufacturers and there is also need for foreign currency to pay for the imports," he said.
"There is need for packaging machinery and there is need to purchase raw materials because agriculture is not fully restored as it depends on the farms to supply the whole value chain.
Zimbabwe National Chamber of Commerce CEO Christopher Mugaga said the budget overrun, highlighted in Chinamasa's statement was bad for business.
"The issue of [the growing] domestic debt will crowd out any potential investment from the private sector, erode investor confidence and this will make the cost of borrowing high," he said.
"I think the budget outturn is depressing because the figures, which were being presented, are not very attractive."
He, however, said the budget review should have also touched on the special economic zones and the specific benefits.
"We would have expected the minister to delve into the issue of special economic zones and give a structure of what the benefits are for investing in these zones.
He added that industry wanted the minister to address or update the nation on the cash challenges prevailing on the market.
"The minister could have spoken about cash shortages and bond notes available in the country as some of the money is now being found outside the country. Cash shortages were not discussed in the economic review, but this is one of the drivers of the industry. The minister should also update us on the progress on the bond note facility and the trend going forward," he said.
Chinamasa said the public service wage bill continued to be a huge drain on the fiscus.
"For example, the education budget, including allocations towards ensuring availability of the education service providers, that is 148 449 teaching staff in our primary and secondary schools as well as tertiary institutions, absorbed $1,11 billion during 2016, this notwithstanding that both primary and secondary schools across the provinces continue to experience high teacher-pupil ratios," he said.
Mugaga said the government needed to look at new ways to expand its revenue base in line with the current economic trends.
"The wage bill is not as big as we think but what makes it big is the narrow budget," he said.
"The problem is not the budget overrun, the country's foreign direct investment is as low as $300 million. how do we fund the expenditures where the money goes only to salaries and wages? The issue is to expand our revenue base."
Despite the continuous economic challenges faced by the country, Chinamasa said he was optimistic that the economy was on the rebound, projecting a gross domestic product growth rate of 3,7% this year against 0,7% achieved last year.
Source - standard
