The Sunday Mail
Finance Minister Patrick Chinamasa recently presented the Pre-Budget Strategy Paper (BSP) in Victoria Falls.
Given these ongoing consultations on the 2016 National Budget, I wish to make the following observations and contributions to the debate.
The envisaged GDP of about US$15 billion, in my humble opinion, appears to be a gross understatement.
This is particularly so when viewed against our neighbour, Zambia , whose GDP is about double this figure, which country has about the same population as ours but much less and diversified natural resources.
Granted, Zimbabwe has suffered severe GDP contractions during the last decade-and-a-half, induced in the main by illegal Western sanctions, whilst Zambia on the other hand enjoyed a good measure of economic growth.
My suspicion is that a large chunk of goods and services offered by the informal sector in Zimbabwe is not captured in this GDP projection.
I have long been an advocate for re-basing the country’s GDP statistics, which may now be misleading. My reasoned GDP estimation should be in the order of plus/minus US$25 billion.
Nigeria undertook such an exercise in the not so distant past, which to the surprise of many showed it was Africa’s biggest economy, surpassing South Africa.
The real annual GDP growth rate is forecast at 2,7 percent for next year, compared to 1,5 percent previously predicted for 2015.
This is far below the Zim-Asset target of six to eight percent annually. I find these rates unacceptably low.
The nation should be more ambitious and plan accordingly, targeting double-digit annual GDP growth if we are to make meaningful impact on people’s standards of living.
This is both quite feasible and achievable.
We should draw inspiration from the fact that currently six of world’s 10-fastest growing economies are in Africa.
These include Ethiopia, Rwanda, Ivory Coast, Ghana etc, despite challenges posed by corruption just as in our case.
Free of corruption their growth would be greater, as would Zimbabwe’s.
Our good old friend from the East, China, recorded consistent double-digit growth rates for many, many years and it is now the world’s second-biggest economy.
Zimbabwe’s Budget has largely remained static for the past five years, at about US$4 billion or less, and is seen at about US$3,99 billion in 2016, per the BSP.
Repeated claims, cries and complaints of limited fiscal space and dwindling revenue collections, for whatever reasons, are becoming monotonous.
To me, this is a clear indication of lack of innovative financial engineering, absence of creativity and ingenuity.
To overcome these glaring shortcomings, I propose that in addition to seeking relatively inexpensive long-term financing on international capital and money markets, we float an international bond of, say, US$5 billion for the 2016 National Budget.
This bond could be denominated in Chinese yuan to avoid possible problems related with US sanctions.
The proposed allocation of a mere US$280 million for capital expenditure in the BSP is grossly inadequate.
A large portion of the bond proceeds could be used to fund Agribank, the Infrastructure Development Bank of Zimbabwe, the Industrial Development Corporation, and a new institution that will specialise in financing requirements of the mining, tourism and SMEs sectors and sub-sectors.
Now that we have shown real zeal and focus to settle our foreign arrears, we should exhibit the same — or greater — zeal in settling the domestic debt in the 2016 National Budget.
The following are some of the suggested sources to clear domestic debt arrears:
1. Bond Coins — Already in circulation, and making use of the unutilised portion of the US$50 million facility already secured;
2. Zimbabwe Dollar Coins — Currently lying idle in RBZ vaults or private places, at the exchange rate of one to one with US cents, as is the case with bond coins. This should be accompanied by simultaneous phasing out of all rand and other foreign coins from our financial system to avoid unnecessary confusion to the transacting public;
3. Arising Proceeds — If we successfully sue for illicit capital outflows, eg fraudulent export as samples of more than 100 000 tonnes of diamond ore from Chiadzwa diamond fields about 15 years ago by a South African-headquartered firm; and
4. International Bond — Part use of the proceeds of my proposed US$5 billion international bond, if successfully raised.
These measures have the additional positive effects of improving money supply, demand levels, disposal incomes and liquidity in the national economy.
Zimbabwe should benefit from the anticipated rebound of the global economy with growth set at 3,6 percent from 3,1 percent (notwithstanding the slowdown in China), and given the negative effect of the appreciation of the US dollar on exports to South Africa, serious thought and consideration should also be given to export diversification to other markets.
FDI projections, which are anticipated to be low at US$614 million in the BSP, should be reviewed upwards in light of the US$3 billion expected in 2015 given the US$2,3 billion already achieved to October 31.
We must decisively deal with corruption, revenue leakages, smuggling and over-expenditure without forgetting, of course, the long overdue parastatals reform and civil service rationalisation.
It should be noted that the unacceptably high proportion of revenue going to civil service wages (some 80 percent of the National Budget) will self-adjust to near acceptable proportions if the desired capital expenditure levels outlined above are attained.
This would, to some extent, do away with any talk of retrenchments.
Edmore AM Ndudzo is a certified public accountant and chartered accountant. He was the first black treasurer of the City of Harare and writes in his personal capacity and in the national interest.
