Zim GDP growth
Economic growth has often raised living standards around the world. Countries like China, whom in 1980 where almost the size of Zimbabwe’s economy have grown to become economic powerhouses over the years.
However, modern economies have lost sight of the fact that the standard metric of economic growth, gross domestic product (GDP), merely measures the size of a nation's economy and doesn't reflect a nation's welfare. Persuading policy-makers and politicians of GDP’s limitations is no easy feat.
This week Finance Minister Mthuli Ncube released a dashboard view on the country’s Transitional Stabilisation Programme (TSP) and in this document he painted a bright future on the country’s economic prospects. The Finance minister said with the inception of the TSP, fiscal policy now targets a budget deficit in line SADC threshold of below 5% of GDP.
As a result, Government has been rigorously implementing fiscal consolidation measures directed at containing expenditures while strengthening revenue collections (e.g. introduction of 2% Intermediated Mobile Transfer Tax). On that front, Treasury appeared to have ticked the boxes.
The floating of the domestic currency which was at par with the United States dollar was another big step that government took in February. It is only in June that government lost the plot when it hurriedly abandoned the multicurrency system ostensibly to stimulate exports. In reality the move was meant to calm a restless civil service that was demanding payment of salaries in US dollars. Those demands still stand.
Before the reforms in February the monetary system lacked flexible utilisation of a full set of monetary instruments to influence economic activity. In addition, the adoption of a hard and strong currency such as the US dollar compromised competitiveness of local companies.
Minister Ncube also said he deserved a pat on the back for managing the current account. Official figures show that the current account, for the first time since the adoption of the multi-currency regime in 2009, registered a surplus of US$196 million in the first quarter of 2019. This was due to the impact of import management measures under implementation, which prioritise capital and production inputs as opposed to non-essential finished goods.
Ncube in his update on the TSP said focusing on stabilizing the macro-economy and laying a foundation for sustainable and shared private sector-led growth. In reality that has not been the case, industry is on tenterhooks, tobacco farmers are unhappy and so are gold producers due to an unstable currency.
The Finance minister said the last five years were marked with growing fiscal deficits due to fiscal indiscipline emanating from failure to adhere to approved Budgets, with significant expenditures being incurred arbitrarily outside Budgeted Votes, and failure to follow laid down systems, at times involving quasi-fiscal expenditures. The issuance of Treasury Bills to fund programmes such as Command Agriculture which has been shrouded under a veil of secrecy has been a talking point in recent months.
Sadly that message of fiscal consolidation and laying the foundation for growth does not resonate with the majority of Zimbabweans who now languishing in poverty due to rising inflation and companies scaling down operations. Hospitals are not only understocked but dysfunctional too due to an industrial action by health professionals. Urban cities and towns have no running water and primary and tertiary institutions are in a dire state.