Maravi

(NEWZIMBABWE) Creating a fair, shared economy

Creating a fair, shared economy
24/11/2011 00:00:00
by Tendai Biti

Opening remarks by Finance Minister Tendai Biti while presenting the 2012 budget at the House of Assembly on Thursday, November 24:

"Development requires the removal of major sources of unfreedom: poverty as well as tyranny, poor economic opportunities as well as systematic social deprivation, neglect of public facilities as well as intolerance or over-activity of repressive states.

Despite unprecedented increases in overall opulence, the contemporary world denies elementary freedoms to vast numbers –– perhaps even the majority–– of people."

Development as Freedom (2000): Amartya Sen

Mr Speaker Sir, the crafting of the 2012 Budget was a daunting task, given the triple ‘demons’ of a highly-charged political environment, insatiable fiscal demands on the State and a highly volatile global financial environment.

This is more so in 2012 where, in addition to our traditional ‘elephantine’ demands, the obligations of monetising the Peace Process, particularly the Constitutional Referendum, are unavoidable.

Mr Speaker Sir, the demands on the Budget are so large visà-vis the resource envelope such that in the words of Oliver Baloyi, ‘tawanzisa mbambo padehwe reshindi varume we’ [we have put too many people on a squirrel-hide mat gentlemen].

Thankfully Mr Speaker Sir, through the grace of God, I have the pleasure of moving a Motion in terms of Standing Order No. 94(1) of the Esteemed Rules of this August House that leave be granted to bring in a Bill in connection with the Revenues and Expenditures of the Republic of Zimbabwe for the fiscal year January––December 2012.

Mr Speaker Sir, this Motion is brought in compliance with the provisions of our Law. Section 103 (1) of the Constitution of Zimbabwe, read together with Section 28 (1) (a) of the Public Finance Management Act [Chapter 22:19], obliges the Minister responsible for Finance to prepare and lay before Parliament, on a day on which Parliament sits, before or not later than 30 days after the start of each financial year, Estimates of Revenue and Expenditure of Zimbabwe for that financial year.

Mr Speaker Sir, it has been a long, lonely and bumpy road that we have traversed since 16 February 2009 – exactly 1,013 ‘tortured’ days to date.

Mr Speaker Sir, it was evident from the very first day of the Inclusive Government that the State of our Economy was parlous and atrophying, demanding that difficult, but strategic choices had to be made, which were both curative and palliative.

Those decisions, Mr Speaker Sir, were made through the Government Work Programme and the Short Term Emergency Recovery Programme (STERP), representing the first step towards the economic rehabilitation of our country.
STERP focused on:

[I have put the neoliberal code in boldface - MrK]

• Restoring macro-economic stability, with special emphasis on curtailing the cancer of hyper-inflation;

• Restoring basic social services, including the re-opening of hospitals and schools;

• Job creation and supply side recovery;

• Restoring the functionality of enablers and public utilities, in particular energy, water and sanitation; and

• Nation building and peace building through:

• Establishment of peace and stability in the country; and

• The Constitutional Making Process and the advancement of the Democratisation Agenda.

The tough decisions made in the nascent days of the Inclusive Government brought material dividends which included the following:

• Macro-economic stabilisation, particularly in containing inflation;

• Improved capacity utilisation in the productive sectors of agriculture, mining and manufacturing, from averages below 10% to around 30-50%;

• Removal of price distortions, in both foreign exchange and goods markets;

• Resuscitation of financial sector services;

• Improvement in public service delivery, particularly in the areas of water and sanitation, transport, health and education sectors;

• Improvement in social protection programmes for vulnerable groups;

• Overall business confidence building;

• Policy consistency and predictability on key policy fundamentals;

• The enactment of key legislation dealing with the credibility of public accounts; and

• Re-engagement with the international community.

Following the implementation of policy measures to stop economic haemorrhage and melt-down, Government, in STERP II and the 2010 Budget, increased attention on capital formation and overcoming the overall infrastructural deficit.

Under STERP II and the 2010 Budget theme “Reconstruction with Equitable Growth and Stability” we, thus, in this period increased the share of public resources allocated towards Public Sector Investment Programmes (PSIP) and other public works.

Mr Speaker Sir, Honourable Members will recall that the extensive consultations we carried out last year in preparation for the 2011 Budget had highlighted the high level of despondency, alienation and reification over public affairs amongst our people.

Clearly, the majority of our citizens felt that they were excluded and that they were innocent bystanders in an economic environment that was perceived as neither fair nor inclusive, prompting the theme of our 2011 Budget - “Creating a Fair Economy: Shared Economy, Shared Development, Shared Transformation”.

Doing justice to this, however, remained constrained by the confines of the little fiscal space we have, further challenged by a disproportionally high wage expenditure allocation consuming over 60% of our resources and that way compromising expenditures towards human capital development, social delivery and capital formation.

Our work in the last 35 months, executed under the various thrusts of stabilisation, reconstruction and creating a fair economy, has been intended to stop the haemorrhage, stabilise the economy, reconstruct and graduate it towards sustainable rapid growth. We had to catch up with the rest of Africa that had shown us a clean pair of heels in the preceding 15 years.

BUDGET CONSULTATIONS

Mr Speaker Sir, consultations and preparations for the 2012 Budget benefitted from the guidance offered by the issuance of a Pre-Budget Strategy Paper which Treasury prepared in August 2011.

The extensive consultations saw Treasury teams receive views of our people throughout the country, that is from Nyamaropa to Nyamandhlovu, Chiendambuya to Chimhandamabgwe, Chirimuhanzu to Chivi, Nerupiri to Nembudziya, Zibhowa to Ziyaminya, Muzokomba to Muzarabani, Forty Four to Fort Rickson, from Dotito to Dongamuzi.

In this regard, allow me, Mr Speaker Sir, to thank the hundreds of people that we interacted with. These ranged from captains of industry and their chambers, the CZI, ZNCC, Chamber of Mines, to trade unions, including the ZCTU, ZFTU, and Government Staff Associations.

Mr Speaker Sir, ordinary individuals also had opportunity to input into the Budget Consultative process. Hence, we were able to listen to the likes of Brighton Murimi, Pardon Mudzimu we met in Murehwa, Oliver Baloyi, Sylvester Chin’’anga, Tichaona Sithole we met in Zaka, Nation Ndlovu, Mainos Dube we met in Gwanda, Eric Bloch, Donald Khumalo and Calvin Ncube we met in Bulawayo, to name a few.

Mr Speaker Sir, the 2012 Budget consultative process would have been incomplete in the absence of the engagement of Parliament and its Committees, including the Budget, Finance and Investment Portfolio Committee.

Mr Speaker Sir, allow me, therefore, to express my appreciation for Parliament’s invaluable contribution to the Budget consultative process.

The inputs of the Budget, Finance and Investment Portfolio Committee, and all the Honourable Members of the House of Assembly and the Senate who were able to either attend or input into the Pre-Budget Seminar for Members of Parliament held in Victoria Falls over 2-5 November 2011 were invaluable.

In particular, I would like to pay a special appreciation to your leadership and guidance, Mr Speaker Sir, as well as that of Madam President of the Senate, throughout the Pre-Budget consultative process.

Overall, our Budget Consultative public outreach programme was as enriching as it was humbling. The fact of the matter is that our people know what they want and are able to recognise patronising ‘top down’ approaches in development issues that treat them as subjects and objects of policy and not shareholders and crafters of the same.

In this regard, it did not matter whether we were listening to our Traditional Leadership at Chibhanguza Hotel in Murewa or to ZAPU veterans in Gwanda.

Secondly, Mr Speaker Sir, once again the sense of alienation and despondency remains high. There is a clear anti-Harare sentiment out there. The feeling is that everything happens in Harare and that to be a true and participating citizen of Zimbabwe one must be domiciled in Harare–– ‘everything is in Harare and Harare is everything.’

Furthermore, Mr Speaker Sir, there is overwhelming self-evident frustration over the seemingly endless and on-going political discord and disunity within our country.
Mr Speaker Sir, the issues that are uppermost in our people’s minds can be summarised as follows:

• Political discord and disunity;

• Power and energy crisis;

• Unemployment;

• Transparency over diamond revenue streams from mining at Chiadzwa;

• Easy access to basic services, including business licences, national registration documents and banking services;

• Education, health and other social service delivery;

• Lack of liquidity in the economy and the high cost of money;

• Labour market inflexibility, and wages and labour practices that are not connected to productivity;

• Ministries’’ and Government Departments’’ indebtedness to Local Authorities and other public institutions;

• Unproductive and uncontrolled Government expenditure;

• Reconstruction and rehabilitation of road infrastructure and completion of on-going projects;

• Guaranteeing clean water supply and improved sanitation services;

• Social protection and safety nets, including for people living with disability;

• Support for agriculture and household food security;

• Continued stability in the price level, including sustainable wage levels;

• Consistency in policy implementation.

THE THRUST OF THE 2012 BUDGET

Mr Speaker Sir, the harsh reality from our consultations is that we are a small dual enclave economy, arrested by unevenness, inequality, poverty and under-development.

There is stagnant accumulation and total absence of linkages between the means of production and the means of consumption. In short, ours is a rent-oriented economy dominated by underproduction, informalisation and self-induced policy distortions.

Mr Speaker Sir, implementing the Medium Term Plan’s (MTP) vision of “Enhancing a democratic developmental State anchored by a growing and transforming, socially just economy” would go some way towards answering some of the economic concerns being raised by our people out there.

Rallying around such a unified common vision, underpinned by the implementation of programmes guided by the compass of the MTP, launched on 7 July 2011 is, Mr Speaker Sir, an imperator to addressing the prevailing development deficit.

In this regard, we have an obligation to shift Government resources from corrosive recurrent expenditure in favour of inclusive and pro-poor growth areas - a difficult task given the legacy issue of a high and disproportionate share of wages in overall Budget expenditures.

We have to live our motto: “We eat what we kill”, avoiding fiscal sclerosis of unbudgeted expenditures, whether it be on account of wages, travel, support to ailing parastatals, among others.

Expenditure management and fiscal control requires discipline and deep appreciation that nations, like ordinary households, cannot live beyond their means without paying a price.

The penalty for fiscal indiscipline being macro-economic destabilisation, debt overhang and economic disequilibrium – in short, the dark days of our lost decade where we virtually rewrote every downside economic statistic.

Quite clearly, it is important that the top leadership of our Government remain at the forefront of fiscal prudence and discipline in this economy. Without their oversight and enforcement, their discipline and their wisdom, this economy will fail.

Equally, this Parliament must carry out its Constitutional duties, as an overseer of the cataleptic omissions and commissions of the Executive. Civil society, ordinary citizens and the Press must also play their part in ensuring that national assets, including the Consolidated Revenue Fund, are not pillaged through corruption, clientelism, or bad decisions.
Thus, this Budget will focus on the following issues:

• Consolidating macro-economic stability, founded on an anti-cyclical macro-economic framework;

• Deliberate focus on inclusive growth with jobs;

• Attending to the issue of capital formation through Public Sector Investments, with special emphasis on completing outstanding capital projects as opposed to green fields;
• Ensuring and establishing food security;

• Redesigning the financial services sector to promote savings, financial deepening, viability, sustainable finance to the business sector, as well as reduction of financial sector vulnerability;
• Decentralising allocation of resources, with special emphasis on even and equal treatment of Provinces;

• Investment in social services delivery, in particular health and education;

• Creating a conducive “Doing Business Environment”;

• Monetising the Peace Process, in particular the Constitutional Referendum, National Healing and the GPA democratisation imperators;
• Tackling critical enablers, in particular energy, water and sanitation; and

• Special focus on rural under-development through addressing rural energy, water and agriculture.

In short, Mr Speaker Sir, we intend to focus on attaining both, growth that is pro-poor, broad based across all sectors and, a pattern of growth that moves us towards structural transformation.

More critically, Mr Speaker Sir, we intend, within the confines of the limited fiscal space we have to create and support an environment conducive for investment that addresses issues of equity and equality of opportunity across the country. Harare cannot continue to be the sole development centre of the State.
Mr Speaker Sir, put simply, the pursuit of inclusive growth, growth with jobs is the focus of this Budget.

GLOBAL OUTLOOK

Mr Speaker Sir, our economic fortunes are also inter-twinned with developments in the global economy.

Recent global developments paint a gloomier outlook for the world economy, with some of the bigger economies, most notably the Euro zone and the USA, experiencing even deeper crises into the last half of 2011 and into 2012.

The crisis also comes at a time when parts of Asia are experiencing devastating natural disasters, while the Middle East and some northern parts of Africa are coming to terms with impacts of socio-political unrest.
The BRICS countries, particularly China, India and Brazil, are not spared either, with the same facing inflationary pressures.

Therefore, global economic growth is now projected to slow down to 4% in 2011 and 2012, from over 5% in 2010. However, this growth will be uneven, with weak growth of about 1.5-2% in advanced economies, moderate growth of around 4.5-6% in Sub-Saharan Africa and Latin America and relatively high growth rates of around 8% in parts of developing Asia.
GLOBAL VULNERABILITY

Slowdown in global economic activity also poses risks of large and abrupt capital outflows from emerging economies, including Zimbabwe. This will likely trigger slow-down in financial lending, commodity prices and export realisations. Banks with underlying vulnerabilities related to excessive credit, might experience systemic risks.

Mr Speaker Sir, it is also pertinent to point out that in general terms, Sub-Saharan Africa is coping better with the present global financial crisis than it did with the previous ones of 1975, 1982 and 1991.

Core to this has been the existence of pre-crisis macro-economic policy buffers and the adoption of counter cyclical fiscal policy responses–– key lessons for Zimbabwe.

Zimbabwe’s vulnerability to growing global financial uncertainties is not small, given that our current account deficit is to a large extent financed by inflows of short-term capital.

Furthermore, to the extent that our recent growth pattern has been commodity driven, prolonged sluggish global growth would exert harder policy options for our economy.

In order to navigate this storm, Zimbabwe should adopt fiscal responses that anchor trade competitiveness and strengthen fiscal policy effectiveness in dealing with both global and domestic shocks.

In short, it is important to continue executing an anti-cyclical macroeconomic policy framework, whilst at the same time creating fiscal space to finance critical infrastructure and social expenditures.

Furthermore, our limited access to external financing necessitates that we employ strategies for re-building fiscal buffers. This is precisely the reason why we continue to maintain the SDR as a reserve.

However, this is not enough. Productivity and equilibrium must be increased so that we are better able to protect ourselves against external shocks.

High food and energy prices also underscore the need for Zimbabwe to improve social safety nets and building of reserves and fiscal buffers–– all of which require exercising prudent fiscal discipline.

Diversification should also be pursued to avoid over-reliance on a few commodity exports and markets, that way creating scope for developing countries to reduce the impact of shocks.

[CLICK HERE to read full budget statement]

Labels: BUDGET, MDC, NEOLIBERALISM, STERP, TENDAI BITI

posted by MrK @ 7:29 AM