MDC-A’s economic proposals: Not much separates us

27 Nov, 2020 - 00:11 0 Views
MDC-A’s economic proposals: Not much separates us Nelson Chamisa

eBusiness Weekly

Kudzanai Sharara
Taking Stock
This week, the MDC Alliance led by Nelson Chamisa presented its State of the Economy Address (SEA), in which it made several proposals that it believes will take Zimbabwe forward.

While SEA touched on many areas ranging from political to social issues among others, this article will highlight economic issues and compare them with those under National Development Strategy 1.

Looking at NDS1 and SEA it should not be difficult for Government and the MDC Alliance to find common ground.

The differences as we show here are very few and narrow.

Under the headline, Macroeconomic Stability, SEA talks of the need for fiscal consolidation. Fiscal consolidation is defined as concrete policies aimed at reducing government deficits and debt accumulation.

SEA says Zimbabwe must put an end to the days of expansionary fiscal policies characterised by budget deficits and excessive expenditure. It restates the need at the very least to maintain a primary balance. The State must leave within its means, it reads.

The Government has emphasised the need to live within its means and cutting down on the budget deficit.

Finance Minister Mthuli Ncube has taken every opportunity to highlight Government’s success in terms of fiscal consolidation through expenditure containment measures. It wants to limit the civil service wage bill below 50 percent.

While SEA talks of the need for the country to at least “maintain a primary balance”, Minister Ncube has talked of a primary surplus, a primary balance in reality. Going forward, the plan is to maintain fiscal deficits averaging not more than 3 percent of GDP.

SEA, however, believes the consolidation can be achieved through retrenchment in particular on elite lifestyle support schemes like travel, shady farming schemes, luxury vehicles and other hefty packages. These are not unreasonable suggestions. The Government has hinted on some of these and probably just needs to put more effort into implementation. If Command Agriculture is what SEA is calling “shady farming schemes”, then the Government is already moving away from that and has brought in the private sector to provide funding under a smart agriculture facility.

On borrowing, SEA suggests that if the Government is to borrow, such borrowing should not exceed 3 percent of GDP. While the idea to limit borrowings is highlighted in both SEA and the NDS1, it’s the magnitude where they differ. NDS1 targets to maintain public debt to GDP level below 70 percent by 2025.  Very few countries, if any in Africa,  have a government debt to GDP ratio below 60 percent.

SEA talks of restoration of real wages. It should. Zimstat reportedly said Zimbabwe has 8,9 million poor people and of that amount, 6 million live in extreme poverty. Unfortunately, even those who are formally employed could be classified as poor. The lowest paid teacher, for example, is now earning just in line with the Poverty Datum Line (PDL). The call to restore real wages is thus justified. The proposal to retire those that have reached retirement age on a basis of a social programme that will allow them to re-base their lives is a noble suggestion worth considering.

SEA calls for pension reform and compensation, something that the NDS1 talks about. Economic instability has eroded pension savings rendering most beneficiaries relatively poor, reads NDS1 as it promises that pension reforms will be accelerated to facilitate the preservation of pension value.

However, suggestion that NSSA concentrates on pension management as opposed to the investment arm does not make sense. While NSSA has failed in some of its investment decisions, the investment aspect of the pension fund should remain a key focus area. Focusing on contributions alone without investing the proceeds is not sustainable.

SEA’s call for positive interest rates is a no brainer. Positive interest rates encourage savings. High national saving will raise future living standards as this finances investment as well as reduce international borrowing. If a nation borrows to finance its investment, the result is a current account deficit. A country with low savings will have low investment and low productivity unless it resorts to borrowing.

Borrowing, however, comes with its challenges. Large-scale borrowings are not sustainable. The central bank should thus come up with instruments and policies that encourage savings.

On currency, SEA’s long terms plan is to join the Rand Monetary Union as well as end export surrender requirements. Joining the Rand Monetary Union is a route that Government might never consider again but removing export surrender requirements is not a far-fetched idea. What is probably needed is a scenario analysis to guard against negative outcomes.

Still on monetary issues, while SEA says the Reserve Bank Act must be amended to ensure that there is no lending to the central Government, NDS1 says it will prioritise amendments to the RBZ Act to reduce the limits of borrowing by Government from the RBZ. It should not be difficult to find a common ground on this and build confidence.

On the issue of land, SEA says a comprehensive land audit to determine land use and multiple land ownership should be conducted. It talks of rationalising land sizes and allow the majority of Zimbabweans to access land transparently.

There is already activity in this area, what is probably needed is to share notes on what SEA means by “comprehensive land audit” in comparison to what has been done. How transparent should the process be, where are the grey areas, what sort of tenure should we give to landholders, are some of the questions that need to be discussed.

On debt accumulation and management, SEA talks of establishing through an Act of Parliament an independent Debt Management Office.

Such a move can only strengthen the institution. NDS1 says managing public debt is critical to raise the required amount of funding while at the same time ensuring it is sustainable.

To ensure debt transparency, NDS1 speaks of continuous publication of comprehensive public debt reports detailing the stock of public debt and its main features.  Again there isn’t much that separates both parties’ intentions.

In conclusion SEA reads, “We are happy to engage in the discourse of economic recovery for our country, we, therefore, welcome alternative views to the ones we propose”.

It adds: “We remain hopeful that collective action can get Zimbabwe working again, all hope is not lost.”

Indeed, is this not the time to put political differences aside and collectively engage in the discourse of economic recovery and get Zimbabwe working again?

As Zimbabweans, we have more that unite us compared to what divides us . . . its time all forces join hands to build the future of the generation we are creating today. There are enough God given resources to develop this country as long as we have unit of purpose, skills and honest development partners.

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