Criminalise government extravagance says CZI

Criminalise government extravagance says CZI
Minister of Finance and Economic Development Ignatius Chombo

Minister of Finance and Economic Development Ignatius Chombo

THE Confederation of Zimbabwe Industries (CZI) this week called on President Robert Mugabe’s cash-strapped administration to criminalise extravagance, including spending on cars and foreign trips, ahead of the 2018 National Budget expected later this month.
Zimbabwe’s largest industrial lobby group said there were dangers the country could relapse into a sharp slowdown, unless a range of “high risk” factors such as imbalances between nostro accounts and the real time gross settlement system, a spike in central bank lending to government and unsustainable fiscal deficits were tackled.
The comments were contained in CZI’s seven-page input to the budget submitted to the Ministry of Finance and Economic Development.
It lobbied Finance Minister, Ignatius Chombo to apply a strict cash budgeting system previously deployed by former Treasury head, Tendai Biti during the inclusive government between 2009 and 2013 to stem high expenditure overruns.
Biti’s regime kept a tight grip on fiscal deficit expansions during a time when the country briefly entered a period of double digit growth, which fizzled out after the end of shared power between Mugabe’s ruling ZANU-PF and the opposition Movement for Democratic Change party.
Since the country switched to a multi-currency regime in 2009, consumptive spending has averaged 112 percent of the gross domestic product (GDP), while savings have remained in negative territory.
Investment, at about 16 percent, is only enough to sustain a GDP growth of three to four percent per annum, experts have indicated.
About 90 percent of the increase in domestic spending has been consumptive, with 56 percent of that by the private sector, according to statistics by another business lobby group, the Zimbabwe National Chamber of Commerce.
It says 44 percent of this is by government, whose current spending has more than trebled from $900 million in 2009 to over $3,5 billion this year, against a shrinking revenue base.
The CZI called for a new law to force ministries to reign in overspending. It also recommended that government’s “overdraft with the RBZ should be eliminated and replaced by appropriate instruments that formally define (its) debt to the banking sector in a planned manner to manage liquidity”.
It expressed reservations that Mugabe’s administration had stuck with dealing with symptoms of the ongoing economic crisis, instead of addressing causes of the turmoil that has sparked de-industrialisation and left millions jobless.
“We recommend the creation of a fiscal anchor in the law which will stop government and respective arms from overspending,” CZI said.
“The most powerful, most rapid, most effective short-term measure that we can take is to move back to a strict cash budgeting framework, supported by social dialogue to obtain agreed cuts in the cost of employment. We recommend that ministries be forbidden from accruing liabilities, unless cash funding is in place. The fact is that the underlying fiscal imbalances lead to hyperinflation, and there is a real risk of recurrence,” said CZI.
It said government should stick to the 20 percent Statutory cap on its overdraft to the central bank and called for an immediately halt to the RBZ’s Treasury Bills binge, in order to stem potential hyperinflation.
Government has breached the 20 percent by seven percentage points to 27 percent, according to official statistics.
“We are entering an environment of high risk, already, exchange control has tightened with the recently introduced Statutory Instrument prohibiting exchange between dollars and bond notes at the premium. Unless we can put an end to the cycle… we will see additional measures dealing with symptoms which unfortunately, make the situations worse,” CZI’s submission added.
It noted that “options for managing expenditure include elimination of ghost workers, a hiring freeze, suspension of annual bonuses and reduction in foreign travel”.
CZI hit out at government’s failure to act on delinquency each time the auditor general (AG)’s office reports fraud and a rot in corporate governance.
“We seem to be violating our own rules,” said CZI.
“We have had multiple reports by the auditor general, but little movement on implementation of recommendations. Work by the AG has to be respected. Build, operate and transfer and public private partnerships are all viable ways to reduce pressure on the fiscus. We recommend that the focus is on the most loss making parastatals… take an aggressive approach to this to ensure that we realise quick wins. We recommend implementation of findings already done on the various parastatals,” said CZI.

newsdesk@fingaz.co.zw

Connect With Us

Fingaz Polls

Can Emmerson Mnangagwa revive Zimbabwe's economy?