FINANCE Minister, Mthuli Ncube’s economic reforms targets are off course due to missteps in a development which casts a dark shadow on the beckoning of good times for struggling Zimbabweans.
A recent International Monetary Fund (IMF) staff report for the 2019 Article (IV) consultation report highlights that Ncube did not stick to his word.
“While revenue targets were mostly achieved expenditure targets were largely missed in recent years. Due to overspending on wages and agriculture subsidies resulting in deficits being systematically under-projected,” said the report.
The remarks at a time when the country’s wage bill has increased more than tenfold owing to the impact of inflation on salaries.
The global financier said during 2009–18, gold, platinum, and tobacco accounted for about 60% of total export earnings. Further, about 66%t of Zimbabwe’s exports were to South Africa.
IMF said annual FDI was 1.6 percent of GDP during 2004–2017, compared to the SSA average of 2.6% and well below similarly endowed peers—Zambia attracted 6%t of GDP during 2004–2017 but weak institutions, policy inconsistencies, and fiscal indiscipline have eroded investors’ confidence.
“As a result , Zimbabwe is facing an economic and humanitarian crisis exacerbated by policy missteps and climate‑related shocks,” said IMF.
These would require difficult policy choices from the authorities and support from the international community.
The global financier hinted the troubled nation is at a high risk of social instability if the government does not adopt coordinated policies to address food insecurity and serious governance challenges.
IMF said the New Dispensation’s political reforms agenda has been much slower than expected and criticised the promulgation of the Maintenance of Order and Peace Act (MOPA), continuity of Access to Information and Protection of Privacy Act (AIPPA).
The institution warned that government’s move to provide a full guarantee against credit default could effectively lead to the over expenditure typical of the Command Agriculture style.
It was also observed that reserve money rose sharply in the second half of 2019 owing to the resumption of quasi-fiscal operations by the Reserve Bank of Zimbabwe. While reserve money remained broadly stable during the first half of 2019, it nearly tripled during the second half of the year, estimated to have reached $9 billion at year end compared to $3.3 billion as of end-June.
Against the background the IMF projects that growth of the private sector has been adversely affected by the inability of local banks to finance businesses.
It was noted the conversion of banks’ assets and liabilities to Zim dollars at an exchange rate of 1:1 to the US$ in February 2019 caused a sharp shrinkage in banking sector assets from 58 percent of GDP at end-2018 to 24 percent at end-September 2019.
Bank deposits converted into US$ from 6 to 1.6 billion over the same period negatively affected banks’ ability to maintain credit lines with foreign banks, to meet corporates’ needs for working capital, and to fund the government