GUEST COLUMN | Mthuli Ncube – “But what does this surplus mean to us”

By Mthuli Ncube, Finance Minister

A former US Secretary of the Treasury once noted that, “the budget is not just a collection of numbers, but an expression of our values and aspirations.”

Indeed, a culture of overspending and irresponsible finances trickles down and spreads like a disease. It undermines our very basic values and aspirations. And that is why the most important step, and perhaps the most difficult, in reforming an economy is that initial act of balancing the budget.

In record time, we have made it over this first hurdle. Revenues at RTGS$1,9 billion have outperformed targets (RTGS$1,8 billion) throughout the first quarter of 2019. While expenditures have been contained at RTGS$1,5 billion against a target of RTGS$1,7  billion. This has led to savings of RTGS$218,9 million, and a budget surplus of RTGS$443W1 million.  Government is finally earning more than it is spending.

No deficit. Not even breaking even. But a real budget surplus for Zimbabwe. However, the question I keep hearing is “what does this surplus mean to us?”

Well, the values enshrined in responsible economics have already started to bear fruit.

Even with the uncontrollable outside factors from Cyclone Idai and drought; our progress remains. Our foundations for long-term stability are being built. Indeed the surplus has already allowed us to tackle these particular crises head on, and with many successes.

Government, for example, had initially earmarked RTGS$50 million towards mitigating the impact of Cyclone Idai; resources which the targeted welfare of survivors, infrastructure rehabilitation in the areas of roads, bridges, water and sanitation, schools and health facilities, amongst others. The above allocation, however, has since been doubled to RTGS$100 million to cover the emergency requirements. This would be impossible without the budget  surplus.

Likewise, the recent ZUPCO subsidies which are helping so many Zimbabweans on a daily basis are a direct result of this budget surplus. Sensible economics always trickles down.

The structural reforms introduced under the Transitional Stabilisation Programme are therefore providing us crucial breathing room, protecting the economy from failure.

Of course, inflation is yet to be fully tamed. However, fiscal consolidation measures, reinforced with a tight monetary policy stance together with the liberalisation of the exchange rate, are containing previously uncontrolled inflationary pressures.  We must continue to tackle the widespread indiscipline in the foreign exchange market which is still a major source for parallel exchange market premiums feeding into inflation.

This austerity programme cannot merely be about balancing the budget. We have a duty to ensure that we continue to invest in the development of our people and our nation.

During the first quarter, RTGS$12 million was disbursed towards education in support of teaching and learning materials as well as programmes such as student stipend support, school feeding and special needs    education.

Likewise, health support amounted to RTGS$33,9 million, including preventative health and medical supplies, primary health care (child and maternal health) and hospital care (hospitals and health care centres).

Not just a balanced budget, therefore, but an ongoing expression of our values and aspirations.

Furthermore, RTGS$16,5 million was disbursed towards a whole variety of social protection programmes such as BEAM, Harmonised Social Cash Transfer, drought mitigation and sustainable livelihoods.

The fiscal position of the country has therefore been turned around in just six months. We leapfrogged the breakeven point, and jumped straight from month-to-month deficit, to month-to-month surplus.

However, this is just the beginning. And patience is required from all as the process of reform gathers pace. We must regain control of our monetary and fiscal policy.

Indeed, what we did on the first of October last year was to begin the process of restoring monetary policy as an additional tool to deal with macro-economic issues.

It is a complicated matter, but crucial to understand. As long as we were pegged to the dollar, we could not respond, or manage our monetary policy; inflation was out of our control.

It is quite clear that we need to move towards having our own domestic unit account and the RTGS$ is the beginning of that.  But it is a process. You cannot run before you can walk. And our economic legs have been broken for too long, we must first recover and get back on our feet before racing ahead with a full on new domestic unit.

We must continue to fine-tune the interbank market making it more efficient whilst also putting in place the micro institutions for making sure that monetary policy begins to work.

One of the things that we have done in order to boost our balance of payment position is to put in place a US$500 million facility which we have sourced from outside of Zimbabwe in order to deal with demands for meeting external payments from importers and others.

While this of course is not a long- term solution, a wounded economy sometimes needs crutches, aid or support from friends on the tough road to recovery.

But we are making great strides, and progress is real. We have a surplus in both RTGS and US$.

This is no small achievement.  This is the culmination of tough economic decisions, a nation pulling through and working together, and a new economy being rebuilt for a new Zimbabwe, on the shared values of responsibility, progress and aspiration towards prosperity.