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'Zimbabwe economy to undergo painful epoch'

by Staff reporter
12 Oct 2018 at 06:45hrs | Views
Government is putting in place a cocktail of stern measures that will ensure its public accounts will be streamlined within its means while the public has to brace for sterner times as the panacea to stabilise the economy that is expected to revive up to levels of US$ 32 billion by 2020.

This is according to the two-year Transitional Stabilisation Programme (TSP 2018-2020) launched by Finance and Economic Development Minister Mthuli Ncube last week Friday in Harare where he reiterated the need for the economy to undergo "necessary pains" that will ensure it creates sufficient reserves to sustain the current multi-currency system.

The economy is currently reeling from insufficient foreign currency reserves that have been depleted by the wide mismatch between RTGS balances and actual foreign currency stocks within the  market that were brought about by unrestrained Government borrowing that led to excess Treasury Bills flooding the financial market.

Last Monday, Government set a two percent tax on RTGS transactions per dollar which was later revised to start at $ 10. This according to the Finance Minister is expected to go a long way in expanding the tax net while also creating resources to restrain the equally damaging effects of the Government domestic debt.

Conventional channel of Government revenue are no longer effective since the economy went through a transitory epoch to informality.

"We do need austerity now," Mthuli Ncube said.

"To be honest, we need to stop the bleeding. I am faced with a bleeding patient we need to stop this bleeding and this is one way to do that. Secondly we cannot do this without pain, my view is that the more pain we take at the beginning, the first year or two, after that we stabilise our macro-economy after that we will all be happy we took the pain together and we go forward. Let me say this, people don't realise they are already indirectly paying for the weak economy we have, all we are doing now is fixing it by doing sacrifice. So that is the preamble of how I think about it," he said.

He said this will also come down to cutting the civil service to restrain cost burden on the fiscus and this will entail offloading personnel that have reached retirement age and cutting down on allowances and other luxurious costs.

The TSP is hence expected to create savings that will bring back balance in the macro-economy.

The TSP is a precursor to vision 2030 that is expected to see Zimbabwe become a middle income economy.

The economy's GDP is projected to be at $ 32.8 billion in the next two years with mining, agriculture and a revived construction tipped to be at the core of development.

The Ministry of Finance and Economic Development figures show that in 2018, the three sectors have made the largest gains with mining growing by 26 percent, agriculture springing by 14 percent and construction industry up 12 percent.

"Our economy is actually bigger than we think. The official GDP is always said to be $18 billion, actually its bigger it is 25.8 billion. So our economy is bigger than we think it also means that our GDP per capita income is not what we thought. Even as things are, we can see that this middle income status is achievable. For 2019, we expect it to be at $ 29 billion, for 2020 we expect it to be at $ 32.8 billion," the minister said.

Observers say while the economy remains vulnerable to inflationary pressures and low investment there are positive signs going forward.

The road dualisation across the country will not only motivate growth in the construction sector but will also seal the hallmark of transport infrastructure that will bring efficiency in trade particularly the Beitbridge-Chirundu highway.

While these austerity measures will bite the ordinary people particularly, the two percent tax, analysts have called on Government to address the spending culture in Government so that the upcoming 2019 fiscal policy statement will complement these measures spelt out in the monetary policy statement by the RBZ.

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Source - bmetro