eBusiness Weekly
Tawanda Musarurwa
All things being equal, an economy must be inclusive and for the benefit of all.
But sometimes, just sometimes, there can levels of equality.
Zimbabwe’s fiscal authorities have been implementing an austerity-based economic recovery programme, underpinned by the Transitional Stabilisation Programme (TSP), and like all things, its end is nigh as severally expressed by Finance and Economic Development Minister Professor Mthuli Ncube.
“We have done austerity and it has served us well, it has created a good base and allowed us to do a lot of reforms, which have been painful. Now we are ready for the next stage which is to stimulate growth,” he is on record saying.
Austerity to the fiscal authorities means cutting down on Government expenditure, some of it unnecessary.
But some of the expenditure curbs have hit hard civil servants, trickling down to the ordinary man on the streets.
Although Zimbabwe has temporarily halted the publication of annual inflation figures for purely technical reasons, the country’s annual inflation rate is estimated to be around 300 percent by institutions such as the International Monetary Fund (IMF).
The now ended austerity programme also curbed Government expenditures on civil servants’ salaries, with wage adjustments and cushioning allowances all falling the below inflation figures.
And as recently as this week, the Finance Minister announced a number of ‘worker-friendly measures’ including raising the tax-free threshold from $700 to $2 000.
He also announced that tax bands would be adjusted to begin at $2 001 and end at $50 000, above which the highest marginal tax rate of 40 percent will apply with effect from January 1, 2020.
Minister Ncube also revised the tax-free bonus threshold from $1 000 to $5 000, and said that the annual bonus will be based on gross salary.
But clearly all these salary and tax adjustments are below the estimated annual rate of inflation, so much so that one observer at the Post Budget Breakfast Meeting on Friday referred to them as “window dressing.”
It’s a deliberate strategy:
“The secret to dealing with inflation is never to catch up with or overtake inflation. We are not increasing salaries to meet or better inflation,” Minister Ncube responded.
“Because if we do that that would be further driving inflation.”
Civil servants, who constitute the bulk of formally employed workers, have had their salaries increased by 76 percent, yet estimates of the annual rate of inflation are circa 300 percent and rising.
Now, that’s real austerity!
The fiscal authorities are now celebrating the shift from the austerity theme that has permeated 2019, with Minister Ncube emphasizing key achievements namely, liberalization of the foreign exchange market, fiscal consolidation, monetary policy restoration, re-engagement and other governance and structural reforms.
To be fair, the overall impact of all these changes have been to reduce the net incomes of low income earners.
And the man on the street is still trying to figure out how to make a dollar out of 15 cents.
University of Zimbabwe (UZ) economic professor Dr Clever Mumbengegwi says the real problem is Zimbabwe’s failure to properly disconnect from the United States dollar at de-dollarisation.
“The disconnect is where you have the US dollar being the store of value for most people, as well as being the anchor for prices yet on the consumption side wages and transactions being based on the Zimbabwe dollar. So there is a disconnect there, and the issue is the exchange rate, and as long as we have shortages of foreign currency it will be very difficult to connect the two,” he said.
As we head into 2020, two critical question remain: will the fiscal authorities manage to completely dollarize? And are there enough stimulus measures in the 2020 Budget to really make that jump from austerity to prosperity?
Only time will tell. – The Sunday Mail
