Chinamasa’s budget delay indicates dire state of Zim economy

SW Radio Africa By Nomalanga Moyo

05 November 2013

ZANU PF Finance Minister Patrick Chinamasa is now facing the grim reality that “his party cannot rig the economy as they did the election”, an economist has said.

Chinamasa told a pre-budget summit, which ended at the weekend in Victoria Falls, that there will be no budget statement in November as was widely expected.

The national budget will now be presented “possibly in December” or in time for the constitutional deadline of January, to allow the Minister more time to consult.

But Harare-based economist Vince Musewe says the country is facing a crisis, and no amount of consultation will generate revenue where there is none.

Speaking to SW Radio Africa Tuesday, Musewe said: “Many companies are closing down for lack of disposable income, and this means that the revenue base for the government is dwindling as they can’t collect taxes from employees or firms.

“Any budget must first determine the revenue base that it gets. Until you can resolve revenue issues, there is little point in presenting these budgets.”

Musewe said one option out of the current scenario is through borrowing, but added that this will be a tough call for the country given its terrible credit record.

“We even have a Treasury that raids private accounts and refuses to pay and this fans a genuine lack of confidence and uncertainty in the system. It is not surprising that no-one is putting money in the system and the sooner government realises that we are in a crisis and starts addressing this the better,” Musewe said.

The first option is to implement democratic reforms and then go cap in hand to the West to request emergency relief, the economist said.

Given the country’s poor credit history, very few lenders will be willing to lend, as has already been demonstrated recently when even regional countries declined Zimbabwe’s request for money to fund its polls.

Last month, Chinamasa was in Washington where he tried and failed to negotiate financial support and a write-off of the country’s estimated $11 billion debt owed to multilateral lenders.

The second option Musewe said, is to raise revenue from the country’s vast resources, but this calls for transparency, accountability and sound economic policies, which the current administration has been unwilling to subscribe to.

“We can talk about the country’s mineral wealth which should be funding the budget, but the opaque deals which ZANU PF signed during the coalition government were never meant to benefit the country but were aimed at enriching a few individuals and groups within that party.”

The Chinese, ZANU PF elites and the country’s military control the country’s murky diamond sector, as revealed by international rights group, Global Witness.

The country sits on one of the world’s largest diamond deposits and the world’s second largest platinum reserves, in addition to an array of other mineral riches.

Last year diamond revenue from Marange was expected to be in the region of $600 million, but despite government owning a 50% stake, nothing had been remitted to Treasury by June this year.

Last month, the ZANU PF government launched another of its many economic blueprints ostensibly aimed at providing “a new trajectory of accelerated economic growth and wealth creation.”

Musewe dismissed this as pie-in-the-sky: “We must begin to implement genuine reforms and move the country towards a democratic environment. Without that, we can talk and have economic blueprints but the reality is that people are starving and need food.

“We are facing a self-manufactured crisis and Mugabe’s government needs to shun past mistakes and take full responsibility for what it has created. The country needs friends and if indeed China is a friend, why aren’t they giving us financial support?

“Now that the elections are over, people are going to realise that ZANU PF will not be able to rig the economy to fulfil its election promises of hiking wages, providing, water, electricity, as Morgan Tsvangirai warned.”

Musewe’s observations come at a time when health institutions are facing major challenges such as dilapidated infrastructure and a lack of medical supplies. Health Minister David Parirenyatwa last week pleaded with the private sector to step in and adopt wards for renovation, in a bid to resuscitate the ailing institutions.

http://www.swradioafrica.com/2013/11/05/chinamasas-budget-delay-indicates-dire-state-of-zim-economy/