With no safety nets, the poor are getting poorer under Zimbabwe’s austerity measures – UN experts

Zimbabwe economy United Nations
A vendor packs out produce in Mbare: UN panel says the poor need safety nets (pic: REUTERS/Philimon Bulawayo)

Zimbabwe’s economic austerity measures have been implemented without enough safety nets for the poor and are deepening poverty in the country, according to a panel of United Nations experts.  

Under a Transitional Stabilisation Programme announced by Finance Minister Mthuli Ncube last October, government has ended subsidies, partially freed the exchange rate and introduced new taxes in a plan to cut deficits.

Likening the fallout from his measures to flipping the lid on a boiling pot, Ncube has argued that the system of subsidies and a controlled exchange rate had kept an artificial stability that was headed for an even sharper collapse.

But the UN group said in a statement issued on Thursday that the measures, without adequate relief measures, are causing immense hardship to those less well-off.

“We are gravely concerned that, as the situation in Zimbabwe deteriorates, the Government is pushing people further into poverty,” the experts said. “We are not aware of any Government measures to provide even minimal safety nets for those who are already living on an economic cliff-edge and who will suffer the most from these regressive policies.

“The impact of economic reforms on human rights must be assessed against international norms and standards, in line with the Guiding Principles, on human rights impact assessments of economic reforms” they said.

Government wants to cut its fiscal deficit by half in 2019, in response to a crisis fuelled by decades of poor economic governance. “However, there are serious concerns about how the burdens of austerity will be shared,” the UN group said.

Ncube inherited a gaping deficit, which he has sought to tame by limiting the issuance of treasury bills – although he has issued a new lot over recent weeks – and putting a cap on the central bank overdraft facility.

Last year, Ncube introduced an unpopular 2% tax on electronic transactions. It helped narrow the gap in the budget, but also increased the cost of transacting for Zimbabweans who depend mostly on mobile payments for transacting.

In January, the government increased fuel prices by 150% to bring them closer to market prices, arguing that keeping them at previous levels was a subsidy that it could no longer afford. However, the price hikes fuelled violent protests, mostly in Harare and Bulawayo. Under pressure from economists and industry, in February central bank ended the 1:1 currency parity, making way for a managed float. This too has led to price hikes.

According to the UN group, these measures are only hurting the poor.

“While the elite are largely protected from financial harm, those living in or near poverty are bearing the brunt of major price rises, increasingly tight monetary policies, and regressive tax measures announced in the latest budget.”

On Friday, the UN asked donors for an extra US$60 million to help Zimbabwe recover from a cyclone that tore through Manicaland and Masvingo last month. The request raised its total current appeal for Zimbabwe to US$294 million.

“The revised humanitarian flash appeal aims to respond to the rising humanitarian needs of people in Zimbabwe due to a dry spell, challenging economic situation and compounded by the recent Cyclone Idai disaster,” the UN’s resident coordinator in Harare, Bishow Parajuli, said.