Omega Ukama 
A CLEAR and scientific method was needed to quantify, and come up with Zimbabwe’s $18 billion stimulus package, which also lacks a criteria for identifying potential beneficiaries, the Zimbabwe Coalition on Debt and Development (Zimcodd) says.
Finance Minister, Mthuli Ncube
This comes as several other commentators have said Harare “must do a bit of quantitative easing to directly provide cash to citizens with a view of stimulating demand” and economists like Victor Bhoroma, and Prosper Chitambara have said global capitals have come up with relief measures — averaging 15 to 20 percent of their gross domestic product — based on empirical studies.
“Before we even talk about the adequacy of the package, it is important to understand how the government arrived at the $18 billion (figure with) no research… to assess the extent of the impact of national lockdown,” Janet Zhou, Zimcodd’s executive director, said adding, the “essence of the bailout fund was to protect jobs and it should also come with strict terms to vet would-be beneficiaries”.
“It is also not about the gross amount, but… specific amounts allocated to particular sectors… the $500 million allocated to the small and medium enterprises… is not enough… Based on the the Zimbabwe Revenue Authorities (Zimra) statistics that 18 500 were registered in 2019, (it means) each business will get… $27 500,” Zhou said, adding “parliamentary oversight was also key or necessary to monitor fund usages and emphasis should equally have been placed on plugging leakages”.
While the Zimcood boss has said it was “critical for the legislature to be involved in decisions of this nature and right from planning to execution”, it was worrying that the package was availed when Parliament was on recess — an issue also raised by budget committee chair and ex-Finance minister Tendai Biti.
“This indicates that proper public finance management procedures were not followed as stipulated in the Constitution. The role of Parliament was going to be that of assessing… vis-a-vis the size of the national purse. This only explains… Parliament is reduced to… merely rubber-stamping executive decisions, the reason why the country is suffering gross abuse and mismanagement of public funds,” Zhou said.
“Based on the Zimra’s first quarter report, revenue takings amounted to $13,88 billion. So government will need about four months to generate resources to finance the stimulus… in the unlikely event of suspending other lined up government expenditure and direct all the resources towards the stimulus package,” she said, adding for “transparency and accountability purposes, disclosure of any sources of funding were key”.
“The bigger question remains, how can a government that fails to finance the fight against Covid-19 on its own manage to finance a stimulus package? …whilst the… package looks lucrative, the government does not have the capacity to generate the funds,” the Zimcodd boss said.
And Biti said the skint government was just trying to “hoodwink struggling firms”.
“The Finance minister (Mthuli Ncube) must urgently bring… the $18 billion package for scrutiny. There must be a forensic audit of all resources donated and used for Covid-19..,” he said.
In an earlier position paper on the Covid-19 crisis, Zimcodd had called for a deferment of corporate tax, loan repayments, reduction of foreign currency retention threshold and a review of the two percent tax.
Reserve Bank of Zimbabwe governor, John Mangudya
Bhoroma, meanwhile, says the $18 billion package — at nine percent of gross domestic product — “falls way short of economic demands” and was skewed in its distribution goals, although it could also be appropriate for purposes of limiting debt contraction or money printing in a market where inflation nearly 700 percent.
“There is no doubt that the package falls short of the amount needed to stimulate the economy, which is set to register a successive decline in 2020. A package in the range of US$2 billion to US$3 billion would have made a huge impact to the struggling economy,” he said.
“The biggest shock came in the allocation of ZW$6,1 billion to agriculture, while giving the tourism… $500 million. In spite of bringing in foreign currency… averaging US$1 billion… the hospitality sector will get a stimulus package less than one percent of what it brings yearly,” Bhoroma said, adding agriculture was getting a lion’s share at 34 percent of package.
“Provided the stimulus package is implemented on time and reaches the actual producers in the market, there could be hope yet. The market is well accustomed to empty government rhetoric on mega deals and rescue packages, and is doubtful about the authorities’ commitment to sustainable policies, which are traceable and transparent to the taxpayer,” Bhoroma said.
With Zimbabwe’s economy already in serious decline — and expected to shrink by up to 20 percent, and deeper than the minus seven percent contraction recorded in 2019 — due to falling consumer incomes, low investment drive and limited production capacity, employment numbers could also shrink by a larger magnitude than current estimates of 600 000 due to the impact of Covid-19 on production, he said.
Supply chain disruptions, the trained economist said, will continue to affect exports and importation of raw materials, and market confidence in government policy remains low due to policy inconsistencies, and lack of traction on much-needed reforms.
However, the relaxation of import duty on certain raw materials and corporate tax credits of up to 50 percent could help sustain operations in the short term, Bhoroma said.
“Even though the Zimbabwean government did not reveal the source of the funds and actual modalities for disbursement, there are a number of options that could have been considered to raise the funding,” he said, adding the Reserve Bank could issue savings bonds to mop up excess liquidity to reallocate resources to the whole market, which could help in managing inflation and growth in money supply. An external loan could also work, the government could also restructure the 2020 budget and whereby the stimulus could be deducted from there — since the package is nearly 30 percent of the national vote — simply tap into the market or simply print money to finance it.
