The Sunday Mail
Tawanda Musarurwa
All things being equal, an economy must be inclusive and for the benefit of all.
But sometimes, just sometimes, there can be levels of equality.
Zimbabwe’s fiscal authorities have been implementing an austerity-based economic recovery programme, underpinned by the Transitional Stabilisation Programme (TSP), and like all things, it’s end is nigh as frequently expressed by Finance and Economic Development Minister Professor Mthuli Ncube.
“We have done austerity and it has served us well. It has created a good base and allowed us to do a lot of reforms, which have been painful. Now we are ready for the next stage which is to stimulate growth,” he is on record as saying.
Austerity to the fiscal authorities means cutting down on Government expenditure, some of it unnecessary.
But some of the expenditure curbs have been hard on civil servants, trickling down to the ordinary man in the street.
And as recently as last week, the finance minister announced a number of “worker-friendly measures” including raising the tax-free threshold from $700 to $2 000.
He also announced that tax bands would be adjusted to begin at $2 001 and end at $50 000, above which the highest marginal tax rate of 40 percent will apply with effect from January 1, 2020.
Minister Ncube also revised the tax-free bonus threshold from $1 000 to $5 000, and said that the annual bonus will be based on gross salary.
But, clearly all these salary and tax adjustments are below the estimated annual rate of inflation, so much so that one observer at the Post Budget Breakfast Meeting on Friday referred to them as “window dressing”.
“It’s a deliberate strategy”
“The secret to dealing with inflation is never to catch up with or overtake inflation. We are not increasing salaries to meet or better inflation,” Minister Ncube responded.
“Because if we do that, that would be further driving inflation.”
Now, that’s real austerity!
The fiscal authorities are now celebrating the shift from the austerity theme that has permeated 2019, with Minister Ncube emphasising key achievements, namely liberalisation of the foreign exchange market, fiscal consolidation, monetary policy restoration, re-engagement and other governance and structural reforms.
University of Zimbabwe (UZ) economic professor Dr Clever Mumbengegwi says the real problem is Zimbabwe’s failure to properly disconnect from the United States dollar at de-dollarisation.
“The disconnect is where you have the US dollar being the store of value for most people, as well as being the anchor for prices, yet on the consumption side wages and transactions being based on the Zimbabwe dollar. So, there is a disconnect there, and the issue is the exchange rate, and as long as we have shortages of foreign currency it will be very difficult to connect the two,” he said.
