Finance Minister Mthuli Ncube has previously asked for patience from Zimbabweans and he again spoke of austerity measures persisting until 2020. Speaking at the ZITF in Bulawayo in the 24th of April he expressed his confidence in the notion that austerity measures currently in place would not be necessary in a years time.
In the recent past, the government of Zimbabwe’s domestic debt has almost doubled since 2017. The government without budget support from international financial institutions, an ailing economy and a shrinking tax base was perpetually operating in deficit. This trend was halted by the introduction of the Intermediated Money Transfer Tax. This tax which preyed on Zimbabweans who were forced to transact electronically has been a huge earner for the government of Zimbabwe.
However, the tax has quite simply taken money out of the pockets of citizens and placed it in government coffers. The twin problems that came with the RTGS dollar of loss of value and reduced purchasing power have left the economy with suppressed aggregate demand and a forecasted economic contraction in 2019.
While the government is certainly in surplus it is unclear how much has been done to arrest government expenditure. It is clear that as much as 90% of government expenditure still goes to wages and recurring expenditure. Without channelling any of the surpluses towards investment, the 2020 target will mean very little. In its own reports the month of February, the government of Zimbabwe spent ZWL$7.3 million on capital projects against a target of ZWL$47.1 million. And that target was based on budgeted expenditure and not actual requirements.
That the government still engages in what seems like questionable expenditure choices is a sour point as the citizens continue to bear the burden. The government of Zimbabwe also engaged in the transport business through an unsustainable ZUPCO model and want to do the same to alleviate the bread price increase woes.
The government has to their credit have made payments toward the domestic debt amounting to almost $200 million dollars in the first two months of the year. With domestic debt standing at just under $10billion last year they certainly have a long way to go. While Ncube speaks in great detail on the revenue earned the expenditure picture is extremely unclear. He has stated many times that expenditure has tightened but there is very little to back that up.
With price increases the value of revenue from the IMTT will increase as well; 2% of the transaction value. However, price increases in Zimbabwe are also linked with the depreciation of the RTGS dollar.
When the budget was launched in 2018 it was under the title “Austerity for Prosperity” which septics quickly scoffed at changing it to “Our austerity for their prosperity”. A lot will be said about the brilliance of the policies as we have heard from Eddie Cross and Ncube himself. But on the ground, the prices of goods, income levels, purchasing power and currency value have clearly not received the message.