The Sunday Mail
The 2020 Mid-Term Budget Review Statement presented by Finance and Economic Development Minister Mthuli Ncube, for the first time in years, did not table a Supplementary Budget.
Given the state of the economy where pressure to meet costs associated with the impact of coronavirus, many expected the minister to announce additional resource allocation to consolidate the fight.
With inflation having remained elevated, ballooning to 737 percent at the last count in June, many saw it as inevitable for Minister Ncube to table a Supplementary Budget. With civil servants salaries having been eroded by inflation and a volatile exchange rate, many expected Minister Ncube to channel funds to meet the associated demands. Nurses are already on strike demanding higher wages.
Given the above pressures, a government without discipline and focus would have easily found an excuse to turn on the printing press.
Fortunately, it’s a temptation that Minister Ncube resisted and overcame.
Instead, he chose to maintain fiscal discipline restricting the Mid-Term Budget Review to monitoring and evaluation of the journey so far, albeit with a few additional revenue measures.
If there is one lesson Minister Ncube seems to have learnt, it’s that you do not spend what you did not earn as doing so was not only kicking the can down the road, but could be detrimental to future generations.
Some of the currency and economic challenges we face today are a result of indiscipline of the past where running a budget deficit was perennial.
Worse still, funding it through the printing press and excessive borrowing including from the central bank.
Having done so well in terms fiscal consolidation where the Government is living within its means, and is not seeking a bail out from the central bank, it would have been folly for Minister Ncube to give up on all that by promising the nation resources that he clearly knows are not available and might not be available given the projected economic downturn.
This is a signal that Government is committed to fixing the country’s economy.
Running a budget deficit which was financed by borrowings is one of the reasons why the country’s currency collapsed. Minister Ncube said so when he assumed office and made it one of the key focus areas of the Transitional Stabilisation Programme (TSP).
While the country’s need for additional financial requirements to get us through the Covid-19 pandemic cannot be overemphasised, Minister Ncube made the right call by deciding to reprioritise the little resources that the economy has.
Coronavirus and its associated restrictions have meant economic activity is seriously curtailed.
This means Government might not generate as much revenue as it would have wanted.
In addition, the Government does not have the latitude to access external funding, which means it has to do with the little revenue that it collects.
Minister Ncube made the right decision not to promise the nation that he would provide more resources and yet fully aware of the production challenges and the expected economic downturn of not less than 4,5 percent this year.
“Treasury will be dealing with arising expenditure pressures as we consolidate our fiscal positions during the remainder of the year, taking account of revenue performance against inescapable reprioritised expenditures,” Minister Ncube told Parliament.
One of the things that must have informed Minister Ncube to avoid tabling a Supplementary Budget is that the resources channelled towards some areas of the economy are yet to be used.
Moreover, some of these may not even be used this year because of the constraints associated with the coronavirus pandemic.
Some needed personnel to travel, some required equipment from outside the country, but the coronavirus crisis made all that impossible, and the budgeted resources are now available to be channelled where there is most need.
Interestingly the hard-pressed Ministry of Health and Child Care has only utilised 37 percent of what was budgeted for. One would have expected a budget overrun by now, but underutilisation seem to exonerate Minister Ncube’s decision not to table a Supplementary Budget.
His decision must also have been informed by the fact that in May Government had already put in place an $18 billion stimulus package, with associated measures to not only save jobs but boost productivity.
That in itself was as good as a Supplementary Budget with the only difference being in name.
Implementation of that stimulus package is still ongoing hence there was no need of another package at this juncture. This, of course, is something the Government can always revisit when the need arises.
We also find comfort in that the stimulus package was targeted at the productive sector and the results are beginning to show in areas where the funds have already been committed. For example in the winter wheat sub-sector, hectarage is expected to exceed 42 000ha.
So while we are cognisant of the need for more resources for urgent social protection and health needs brought about by the Covid-19 pandemic, it is plausible that Government has maintained discipline and did not resort to short term measures that would come back to haunt the economy.
We fully support the decision to reprioritise the little that we have.
In the words of the third president of the United States, Thomas Jefferson: “Never spend your money before you have earned it.”
