PRESENTATION OF PAPERS: SUMMARY OF KEY ISSUES



1. SESSION 1: THE MILLENNIUM BUDGET: A CRITICAL ANALYSIS


• 1.1 The Current State of the Economy and Recovery Prospects
  Presented by Dr. Peter Robinson, Zimconsult
• 1.2 The Millennium Budget: A Critical Appraisal
  Presented by Mr. Masimba J. Manyanya on behalf of Dr. Godfrey Kanyenze, ZCTU Economists

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PRESENTATION OF PAPERS: SUMMARY OF KEY ISSUES

1. SESSION 1: THE MILLENNIUM BUDGET: A CRITICAL ANALYSIS

1.1 The Current State of the Economy and Recovery Prospects
Presented by Dr. Peter Robinson, Zimconsult

Dr. Robinson’s presentation analysed the current situation of the economy and highlighted that the strategy for ZIMPREST seemed to work in 1996 when the economy witnessed an 8.5 % growth but thereafter growth dropped to 1.5%-3% per annum. This was worsened by a marked decline in real non-salary expenditure in health and education, and the collapse of exchange rates in 1997, which gave rise to inflation which is now at 70%. There was a sharp rise in poverty and social problems greatly compounded by the AIDS pandemic. Dr. Robinson attributed this to accumulated debt to finance budget deficits and poor exchange rate management, which he said had precipitated the present crisis. He highlighted the major difficulties facing the country as high interest, the debt trap and macro-economic instability, which have threatened the public enterprise sector and parts of the banking sector with collapse. Dr. Robinson warned that the crisis could even get worse and that there are no easy solutions to the problems. He recommended serious creative ideas to build a vision that will get the economy on the path to recovery.

Dr. Robinson went further to propose a possible framework for recovery and this included:

• achieving and maintaining a tight grip on the budget;

• commitment to budgetary stringency, with a conviction to restore credibility and confidence, and the starting point on this is transparency on the part of the government;

• some form of financial engineering has to be found to swap short-term Treasury Bill debt for longer-term instruments which attract lower rates of interest (combination of donor financing, international borrowing, foreign and domestic privatisation of parastatals with large assets);

• accepting globalisation and its implications as facts of life; the observation being that this is not yet reflected in government policies and programmes. There are dangers with globalisation but the Government can to minimise the negative aspects in its application of globalisation;

• increasing formal sector employment; and

• expanding remunerative self-employment opportunities.

The current state of the economy was also attributed to inconsistencies in economic policies and programmes followed after independence; from Growth with Equity to Socialism, Economic Structural Adjustment Programme (ESAP), Vision 2020 and now

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ZIMPREST. A well-thought out, well-defined strategy and consistent policies and programmes guiding the development, growth and performance of the economy will help solve the present economic crisis.

1.2 The Millennium Budget: A Critical Appraisal
Presented by Mr. Masimba J. Manyanya on behalf of Dr. Godfrey Kanyenze, ZCTU Economists

This presentation focused on the 2000 budget within the context of the current economic situation. It highlighted that any budget should be conceived within specific situations and within particular contexts. The presentation spent a substantial amount of time analysing the current economic situation in Zimbabwe, to provide the background against which the 2000 budget is contextualised.

At the global level, world inflation seems to be on a downward trend and there is optimism, that the global economic growth is expected to accelerate from an annual rate of real growth of 2.5% in 1998 to 2.8% in 1999 and 3.4 % in 2000, and that there is also optimism in the African context, where economies are expected to grow from 2.8% in 1999 to 4.9% by the year 2000. However, the situation in Zimbabwe is different. There is a crisis and the graph of economic performance is going down. The economy is in a crisis, with marked deceleration of growth from 7% in 1996, 2% in 1997, 1.5% in 1998, 1.2% in 1999 and it is projected to be at 0% in the year 2000 and is likely to experience negative growth thereafter, which is tragic.

Among the major problems highlighted as characterising the country’s economy are:

• High budget deficit which is very unsustainable (Z$25-30 billion a year );

• High inflation (70%);

• Marked decline in real wages and salary expenditure among the people;

• Reduced per capita expenditure, especially in the education and health sectors;

• Macro-economic instability and exchange rate collapse;

• High interest rates; and

• High rates of unemployment.

The presenter highlighted that the budget was presented at a time when the country is facing a high budget deficit representing 9% against a target level of 5%, and a heavy and crippling debt amounting to $146 billion, which is 67.7% of GDP. The presentation also analysed the taxation proposals in the 2000 budget and concluded that although there are some positive elements regarding the alteration of tax bands, the concessions are very marginal. The proposed AIDS levy created an extra burden on the already struggling majority.

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The presentation recommended that the MNAECC needs to perform seriously to create employment and that Government needs to deal with the issue of corruption in parastatals. The presentation highlighted that the budget lacked a vision and recommended that an alternative budget, which identifies the key structures of government and the pertinent issues to be addressed and deal with them at a political level, be worked out.