Biti says Zimbabwe’s 2019 budget is meaningless


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The first challenge in the 2019 budget, Hon. Speaker Sir, is one which a few colleagues, in particular the Chairperson of the Finance and Budget Committee has identified.  This is the challenge relating to the budget’s failure to identify the exchange rate in which it is predicated upon.  This is the failure of the budget to identify the currency in which it is expressed.  To maintain the fiction of a US$1:1 bond makes this budget fail even before it has started.  The reality out there, Hon. Speaker Sir, is that we are existing in a period of serious structural exchange distortion.  We are existing in a period of a multi tier pricing system; there is a price in US dollars, bond notes, and RTGS.  The growing exchange rate in the past two months has been a rate of 1:3.50 or 3.50. In other words, to purchase US$100 you require $350 of the local currency, whether it is bond notes or RTGS. So, we cannot run away from that reality.  If we have a budget of $8 billion, surely it cannot be US$8 billion.  In reality, it means that it is 8.5 divided by 3.5 – [HON. MEMBERS:  Hear, hear.] – It also relates to the GDP.  We have got a contested terrain of the GDP.  We have got the transitional stabilisation plan speaking to a rebased GDP of $25 billion.  What is this $25 billion? Is it US dollars?  Surely, we are not at US$25 billion economy. If that is the case, you then have to discount the rebased GDP of $25 billion by the going rate of 3.50 or the Old Mutual implied rate, which would mean in real terms that our GDP is around US$8 billion.  Unless and until the budget and the Minister is bold enough to deal with this elephant in the living room, the issue of the current expression of the budget and the decimation of the fiction of 1:1 then the budget itself becomes facial.  It is a waste of time.

I want to draw Mr. Speaker’s attention to something that happened this week.  This week, two rating agencies S and P and Mudi removed Zimbabwe from the indices of countries where data is collected and collated for the simple and good reasons that our data is unreliable because we keep on maintaining this fiction of one bond to one US dollar.  Courage is required; the Minister needs to be courageous to recognise that one bond note can never be equal to one US dollar – [HON. MEMBERS:  Hear, hear.] – Not even the Euro is equal to the bond note.  Unless this is addressed, everything we are doing is a joke.

The second thing I want to deal with Hon. Speaker, the Minister must go beyond recognising that one bond note is equal to one US dollar. He must also have the courage of doing that which he actually wanted to do initially, that of de-monetising the bond note – [HON. MEMBERS:  Hear, hear.] – The bond note Hon. Speaker Sir is terrible economics.  You cannot introduce a quasi-fiscal instrument in a dollarised environment.  The net result is in fact what happened.  Bad money always displaces good money and this is exactly what happened.  So, the Minister and the Government must have the courage of de-monetising the bond note.

Thirdly Hon. Speaker Sir, the Minister must have the courage of liberalizing the exchange rate and I would like to submit that if the Zimbabwean currency, whether the RTGs is allowed to settle and if the exchange rate is allowed to be liberal, it will settle at a rate that is much lower than the going rate of the 350 bond notes and in my opinion it will be around 90 because we do have some exports.  We do have an economy to sustain a rate of around 90 to 100.  So, I would submit to the Minister that you need to liberalise the exchange rate.

The other issue I want to deal with Hon. Speaker, is the macro-economic framework which is found on pages 35, 36 and 38 of the Budget Statement.  Firstly, the budget proposes a recurrent expenditure of around $6 billion out of $8.2 billion, a capital expenditure of $2.1 billion and a budget deficit of $1.56 billion.  Given the lack of gross capital formation that our country has experienced since the 60s, I would have submitted Mr. Speaker Sir, that the budget should have had a bigger say on investment in gross capital formation and capital projects. What we have right now is largely a consumption budget in respect of which $6 billion out of $8 billion is actually going towards recurrent expenditure.  We needed to put resources towards the construction of dams, bridges, railway, energy and those things that are affecting our country.  To the extent that the budget focuses so much on recurrent expenditure, it becomes anti-development; it is not developmental in thrust and that is regrettable.

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The Insider

The Insider is a political and business bulletin about Zimbabwe, edited by Charles Rukuni. Founded in 1990, it was a printed 12-page subscription only newsletter until 2003 when Zimbabwe's hyper-inflation made it impossible to continue printing.

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