The Sunday Mail
Zimbabwe’s current economic challenges, worsened by the global Covid-19 pandemic and the resulting travel restrictions and the lockdown, now extended to seven weeks, have been severe for many sectors, with resulting social distress.
Thus the $18 billion rescue package announced by President Mnangagwa on Friday to moderate the economic damage and relieve distress is most welcome and quite timeous.
This is a huge sum, 28,6 percent of the 2020 National Budget or nine percent of the Gross Domestic Product for this year, meaning that 9c in every dollar earned or created in Zimbabwe this year goes into the economic rescue and stimulus package. This is wartime-style budgeting, appropriately so since the pandemic and its effects are in many ways the gravest emergency faced by the world since the Second World War.
More than half the package — $10,7 billion — is for the productive sectors of agriculture, manufacturing, mining and tourism. Here the Government has, very sensibly, decided to set the rules but use the banks to do the actual distribution. Banks know their customers very well, so cannot be bamboozled, bribed, cheated or threatened. They had already said they were prepared to help their customers, within their own limited means, to stay in business and appealed for Government help to make this more effective. $10,7 billion is a substantial contribution and the recent growth in trust between the Government, banks and producers means that this money can be used effectively.
These sums are not grants, but rather special loans designed to ensure the productive sectors can get through the emergency without job losses, without businesses having to close and without the lockdown and other pandemic control measures triggering a depression. Keeping businesses alive while they go through the required health steps to reopen and then helping them recover and increase their output ensures that Zimbabwe remains in business, and critically that it remains in business by producing. If there is damage then let it be in consumption, not production.
The loan terms of 10 percent annual interest, a six-month grace period while businesses and farmers get back on their feet and then repayment terms over periods ranging from one year to as much as four years, means that producers being helped do not have to go under to repay the loans. By the time the bills fall due they should be back in profit.
Obviously, some can be back in the saddle very quickly, especially if they were in the minority deemed essential services from the beginning. Others, like most in the tourism sector, are going to have a very bad year, even if Covid-19 is beaten back globally fairly soon, since their customers and clients are not going to regain their pre-Covid earnings for some time. So flexibility is required.
The rest of the rescue package is going on alleviating the distress, starting with $2,4 billion in food grants for the rest of the year. Then there is extra help for pensioners, many of whom have lost the odd bits of income they might have picked up and, in any case, will not be getting the kind of family support that was keeping them going, since their families are also in trouble, wherever they live in the world.
The Government has already launched its direct grants to vulnerable families, a move that was always desired and was being planned, but with the pandemic and the lockdown has been implemented at speed.
This group will grow fast, as an acknowledged result of the lockdown and the resulting loss of income for many, although we all hope that the growth will be just a bulge, diminishing again as more are able to get back to work and earn their own living again. In the end these direct payments should be supplementing income, rather than providing the full family income.
In many countries they have replaced former subsidies, which in effect give Government money to rich and poor alike. These grants are survival payments, basically to buy food. The rent arrangements, allowing lockdown rent to be paid late and spread over a number of months, complement these survival grants.
An extra $1 billion is going into the medical facilities, over and above what has already been spent or budgeted and over and above the incredibly generous gifts from Zimbabweans and global partners. This is something that remains after the pandemic as, for the first time in a generation, our public health sector will be properly funded.
The package should do what is intended, keeping us afloat, but will also, if spent wisely by all, allow us to advance at the same time, as we put in place those measures that fill some of our gaps. When you rebuild you can often do it better the second time around.
$18bn rescue package quite timeous
The Sunday Mail
Zimbabwe’s current economic challenges, worsened by the global Covid-19 pandemic and the resulting travel restrictions and the lockdown, now extended to seven weeks, have been severe for many sectors, with resulting social distress.
Thus the $18 billion rescue package announced by President Mnangagwa on Friday to moderate the economic damage and relieve distress is most welcome and quite timeous.
This is a huge sum, 28,6 percent of the 2020 National Budget or nine percent of the Gross Domestic Product for this year, meaning that 9c in every dollar earned or created in Zimbabwe this year goes into the economic rescue and stimulus package. This is wartime-style budgeting, appropriately so since the pandemic and its effects are in many ways the gravest emergency faced by the world since the Second World War.
More than half the package — $10,7 billion — is for the productive sectors of agriculture, manufacturing, mining and tourism. Here the Government has, very sensibly, decided to set the rules but use the banks to do the actual distribution. Banks know their customers very well, so cannot be bamboozled, bribed, cheated or threatened. They had already said they were prepared to help their customers, within their own limited means, to stay in business and appealed for Government help to make this more effective. $10,7 billion is a substantial contribution and the recent growth in trust between the Government, banks and producers means that this money can be used effectively.
These sums are not grants, but rather special loans designed to ensure the productive sectors can get through the emergency without job losses, without businesses having to close and without the lockdown and other pandemic control measures triggering a depression. Keeping businesses alive while they go through the required health steps to reopen and then helping them recover and increase their output ensures that Zimbabwe remains in business, and critically that it remains in business by producing. If there is damage then let it be in consumption, not production.
The loan terms of 10 percent annual interest, a six-month grace period while businesses and farmers get back on their feet and then repayment terms over periods ranging from one year to as much as four years, means that producers being helped do not have to go under to repay the loans. By the time the bills fall due they should be back in profit.
Obviously, some can be back in the saddle very quickly, especially if they were in the minority deemed essential services from the beginning. Others, like most in the tourism sector, are going to have a very bad year, even if Covid-19 is beaten back globally fairly soon, since their customers and clients are not going to regain their pre-Covid earnings for some time. So flexibility is required.
The rest of the rescue package is going on alleviating the distress, starting with $2,4 billion in food grants for the rest of the year. Then there is extra help for pensioners, many of whom have lost the odd bits of income they might have picked up and, in any case, will not be getting the kind of family support that was keeping them going, since their families are also in trouble, wherever they live in the world.
The Government has already launched its direct grants to vulnerable families, a move that was always desired and was being planned, but with the pandemic and the lockdown has been implemented at speed.
This group will grow fast, as an acknowledged result of the lockdown and the resulting loss of income for many, although we all hope that the growth will be just a bulge, diminishing again as more are able to get back to work and earn their own living again. In the end these direct payments should be supplementing income, rather than providing the full family income.
In many countries they have replaced former subsidies, which in effect give Government money to rich and poor alike. These grants are survival payments, basically to buy food. The rent arrangements, allowing lockdown rent to be paid late and spread over a number of months, complement these survival grants.
An extra $1 billion is going into the medical facilities, over and above what has already been spent or budgeted and over and above the incredibly generous gifts from Zimbabweans and global partners. This is something that remains after the pandemic as, for the first time in a generation, our public health sector will be properly funded.
The package should do what is intended, keeping us afloat, but will also, if spent wisely by all, allow us to advance at the same time, as we put in place those measures that fill some of our gaps. When you rebuild you can often do it better the second time around.
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