Chinamasa should have presented 'realistic' budget of $3.5 billion: Biti

MDC ALLIANCE: ALTERNATIVE NATIONAL AGENDA TOWARDS THE TRANSFORMATIVE DEMOCRATIC DEVELOPMENTAL STATE, DELIVERED BY TENDAI BITI CHAIRPERSON OF THE POLICY AND RESEARCH COMMITTEE ON THE 8TH OF DECEMBER 2017 AT HARVEST HOUSE 44 NELSON MANDELA AVENUE HARARE.
 
Introduction
In November of 2017, the country went through a major political upheaval sphere headed by a "military intervention' which commenced on the 14th of November 2017.

That intervention saw, a massive turnout of Zimbabweans on the 18th of November 2017 virtually across the globe, which force of authority resulted in the resignation of President Robert Mugabe on Wednesday 21st of November 2017.

On Thursday 6 December 2017, the recycled Minister of Finance Patrick Chinamasa presented a budget to the country under the theme of a "New Economic Order", which sought to move the country away from a trajectory of controls and lack of reform to a modicum of reform.

We in the MDC Alliance recognize that Zimbabwe is on a knife edge faced with the following challenges:-
 

• The danger of a military consolidation in Zimbabwe and the continuation of a new dangerous state in which there is military/party/state conflation;
• Continuation of the old order of economic lethargy, economic destruction, corruption, patronage
• A continuation of the order of poverty and devaluation of our people, inequality and the continued destruction our people's livelihoods.

It appears from the budget presented yesterday, that the new authorities, are intend on implementing some modicum of economic reform, whilst maintaining a tight grip on power and political space.
 
In our respectful view, Zimbabwe is now entering a dangerous space of the reproduction of a Beijing model in respect of which political space is closed but legitimacy is bought through the bribery of  some economic reforms and the capacity to make the right noises and the correct sound bites, without any substantive reforms.
 
We in the MDC Alliance are clear that:-

• There has to be a genuine legitimate roadmap back to legitimacy and away from the crippling danger of the establishment of an open flagrant military state;
• The negotiation and agreement on significant electoral reforms that will lead Zimbabwe to a free fair incredible legitimate election
• The implementation of institutional and political reforms that are necessary to create a stable transitional state
• A strong door of economic reform necessary to place our country on a trajectory of reform.

 In this document we deal with the issue of economics alone and in the following terms:-

• The pursuit of a fiscal deficit
• The absence of meaningful reform particularly around the wage bill
• The expansion of an enhanced command agriculture framework
• The total failure to deal with the crippling liquidity and cash crisis
• The reproduction of an unsustainable if not dishonest macroeconomic framework

The Fiscal Deficit
The challenges arresting the country result from the pursuit of a fiscal deficit which has been pursued by Minister Chinamasa a departure from the discipline of cash budgeting maintained by the Government of National Unity ironically in the sad presence of President Mugabe.

We in the MDC Alliance expected a total departure from deficit economics which Minister Chinamasa did not commit to doing.

Instead, the 2018 budget, in normative terms, seeks to reduce the budget deficit to 4 percent from 10 percent in 2017. However, there are gross misrepresentations. Economic hygiene and planning for a budget deficit are divorced.

Just for the avoidance of doubt this is possible, during the first year of the Government of National Unity even after paying bonuses for the civil service, the country still had a budget surplus.    

The revenue targets of 5.1 billion dollars in 2018 is without justification  and will worsen the already envisaged budget deficit of 4 percent to GDP and government will only be able to collect around 3.5 billion dollars.

In our respectful view, Minister Chinamasa was supposed to present a budget which is around the realistic figures of 3.5 billion dollars.
 
Structural reform

Brave structural reforms were supposed to be taken in the 2018 budget primarily on the wage bill which is currently taking more than 90 percent of the total budget.
We are of the view that the 3700 youth officers retrenched are just but a drop in an ocean considering the fact that the government employs around 550 000 workers.
We submit that the budget was supposed to envisage reducing the size of civil service by half primarily through the weeding of ghost workers in a phased period of three years.

Macroeconomic framework
 
The budget projects growth rates at 4.8 percent with inflation targeted at 3 percent.
The underlying framework justifying 4,8 percent growth rate is non-existent, inflation is already way above 3 percent due to the high cost of the US dollar. With the existence of multi exchange rates real inflation is above 40 percent with some commodities as high as 240 percent there framework is therefore not legitimate

It is self-evident that the new regime is desperate to create the image of economic reformers and economic liberators.

We contend that the projection of a significant increase in agriculture production in the 2017-2018 season, which in the budget framework, is credited to have a growth projection of 10.7 percent is fictitious.

The framework also projects growth in respect of the electricity and water sector to be in excess of 28.5 percent, another miscalculation considering the lack of transparency in the tendering and licensing process of new energy and power projects in Zimbabwe which have been used as an instrument of patronage.

There is a desperate attempt to create in Zimbabwe a Singaporean model in respect of which legitimacy is bought through economic performance while the political space is closed.

We in the MDC Alliance restate that Zimbabwe is not China, Rwanda or Ethiopia.
 
The ZANUPF government we have known is incompetent, dishonest and predatory; nothing will persuade us that 2018 will be any different.

Expansion of Command Agriculture
The attempt to further militarise the nation is not only unfortunate but ancient. The pursuit of a dirigiste approach has been exposed dating back to the days of the Cold War when it was adopted in Eastern Europe. We maintain that command agriculture is another version of Mugabe's failed presidential inputs scheme albeit with some ingredients of state capture.

In this presentation we put aside the political shortcomings including the fact that the beneficiaries of the scheme are only those connected to ZANUPF excluding the rest of the farming population.

We make the point that the loan that was used to finance the scheme has been clandestinely negotiated, the cost of the money is too high and just like many other loans there is no involvement of parliament.

We are therefore concerned that the expanded command agriculture will put a premium of more than a billion dollars most of which will be abused and not go directly into the farming activities.

It is our respectful submission that agricultural reforms must focus on the following issues.

1. Bringing finality to the land question, at the present moment people are still fighting over land invasions. We restate that there must be a land audit to ascertain ownership and productive capacity as well as issuing of title to current occupants.
2. Deal with security of tenure, newly resettled farmers must be given title to land so as to ensure they have not only land use value but exchange value to ensure borrowing can be against the ownership.
3. Financing agricultural infrastructure: In order to fully empower the newly resettled farmers there is need for seasonal, capital and land loans which can be provided by commercial banks as well as the Rural Development Fund.
4. Agricultural markets: It is crucial that markets for agricultural produce are restored. The current situation in the tobacco industry is unfortunate, must be curbed. Marketing for cereal produce such as maize, wheat must be given a priority.  
5. Investment in equipment: A functional and organized farm must have access to farming mechanisation for tillage, harvesting and transportation, storage will be vital for driving agriculture.
6. Harnessing water resources for agriculture: More than 80% of our arable land rely on rain-fed farming but do not have access to proper irrigation facilities.
7. Access to agricultural inputs: There must be incentives for local blending of compound fertilizers, and exploration of long-term opportunities for cheaper and more sustainable domestic production. Financial support for seed and fertilizer production must be transparently and inclusively offered while constraints on the revival of local input supply industries must be removed.
8. Irrigation intensification and expansion: Improved irrigation is critical to increasing agricultural productivity. Investments in irrigation and a shift from dry land to irrigated agriculture is required.

Financial and Monetary Crisis

Owing to the huge budget deficit created by Minister Chinamasa from 2013 to date, government sought to monetise its activities including ZANUPF programs through the printing of money through two instruments namely toxic treasury bills and the bond notes.

Treasury Bills did not only create a liquidity crisis but also crowded out the space for private sector borrowing.

The government also raided RTGS balances and NOSTRO accounts at the RBZ which are depositor's funds from all the banks in Zimbabwe. As a result a crippling financial and liquidity crisis has ensued resulting in the adoption of bank transfers another fictitious scheme which is not backed by any value.

This resulted in the ballooning of broad money supply (M3) disproportionate to the actual value in the financial market.   

The budget ought to have dealt with this issue; the Minister instead states that the government will reduce the raiding of the RBZ to 20 percent when the right thing to do is to stop borrowing from Central Bank forthwith.

The RBZ net claims on the Central Government reached US$3.5 billion as of September 2017.

Domestic Debt
The government's pursuit of deficit financing and total lack of fiscal restraint has resulted in a sharp spike in domestic debt.

Part of the domestic debt has been created by the reckless assumption of the legacy debt of domestic parastatals including that of the Central Bank.

A large part of the debt is borne by the ever growing and expanding budget deficit.

The government of Zimbabwe puts domestic debt at US$4.014 billion, as of the 30th June 2017.We are of the firm view that domestic debt is now around US$7 Billion even excluding the anticipated budget deficit of US$3.5 Billion. This is a view shared by many leading economists in the country.

There's no doubt in our minds that the budget deficit is a direct product of ZANU PF failure. A comparison between the GNU and the post GNU era reflects this fact.

We in the MDC Alliance contend that the huge chunk of this debt was accrued through extra legal means which entails by-passing the scrutiny of parliament as stipulated by the laws of the land.

We therefore demand that there be an audit of this debt to determine what the money was used for so as to ensure culprits are brought to book and that the government accounts to the people of Zimbabwe through parliament.

The MDC Alliance rejects the lipstick reforms, half backed budget and chats an alternative policy direction Towards a Transformative Democratic Developmental State. 

We therefore suggest the following solutions

1. Resolution of the Political Crisis, there is an obligation to deal with the predatory politics of our country which have resulted in divisions, hate speech, polarisation and more importantly a crisis of legitimacy owing to a series of contested elections. We submit that a credible election is the only way out of the permanent fudge status quo. Failure to deal with electoral sustainability will see Zimbabwe continue straddling from one crisis to another. We view this as a proper path to rebuilding the social contract.
2. Macroeconomic Stability, We eat what we kill in this regard we contend that fiscal discipline must be maintained and that the government must immediately resort to the principle of cash budgeting.
3. Creation of an inclusive growing economy, the MDC Alliance will create a hundred billion dollar economy within 15 years. This economy will grow at an average of 7 percent per annum more importantly economic growth will be shared and inclusive.
4. the MDC Alliance will ensure a focus on major capital projects, industrialisation in a major shift from the traditional extractive model. The team will under this pillar recapitalise DIMAF and ZETREF for the purposes of resuscitation of distressed companies.
5. Attracting FDI, our team will create a conducive environment including the total repealing of the Indigenisation and Empowerment Act, the respect of property rights, the rule of law and constitutionalism.  
6. Leveraging mining and manufacturing, we will bring sanity in the sector including enacting a new Mining Act and a brand new Diamond Act. We will also ensure transparency in the acquiring of claims and more importantly the promotion of value addition in the sector.
7. Financial Sector Stability and Liquidity, urgent demonetising of the bond note, joining the Rand Monetary Union in the medium term and ring fencing of the US dollar balances to avoid a further loss of value in the accounts of the Zimbabwean people.
8. Expenditure retrenchment, a phased ejection of ghost workers over a period of three years so as to rationalise the public sector wage bill and reform of all State Owned Enterprises.
9. Monetising Democracy, all the Chapter 13 institutions must be strengthened and the implementation of devolution of power must be urgent to ensure even development with decision making vested in decentralised tiers and spheres.
10. International Relations, International Re-Engagement, end isolation of the nation, deal with the debt question and negotiate a martial plan aimed at reconstruction.
11. Putting an end to the land question, stop new farm invasions, deal with security of tenure to ensure that new farmers have both use and exchange value and institute a land audit meant to weed out multiple farm ownerships as well as rationalise the ownership of idle farms.