Fiscal policy review: Gvt should bite the bullet

• Published date: 12 September 2016
• Publication title: The Sunday Mail

FOR those who listened to the delayed fiscal mid-term policy review, it is difficult to disagree with the view that the economy is in real bad shape. It is the increase in imbalances in both the domestic and external sectors that is most worrying. The domestic economy is characterised by a widening budget deficit while the foreign sector continues to be weighed by an equally widening current account deficit.

The effect of these twin evil forces is arguably Minister Chinamasa's major headache.

It is precisely the reason why this year's economic growth projection has been revised to 1,2 percent from 1,4 percent.

There is need for real economy policy interventions to put the economy back on track.

Given the current state of the economy, there is need to institute serious economic reforms aimed at rebalancing the economy towards increased production, while at the same time reducing consumption.

And also given the painful nature of economic reforms, there is need for everyone to put their shoulder to the wheel.

A renewed spirit of dedication and sacrifice is also needed in order to rebuild the economy.

Zimbabwe still remains a highly consumptive economy with 97 percent of Government revenue in the first half of the year gobbled by civil servants salaries.

It simply means that only 3 percent is allocated to developmental activities that are crucial in rebalancing the economy.

Now, the biggest question is how Government will continue to keep staff costs in check given that the staff rationalisation exercise has been ongoing since the beginning of the year.

The decision to cut 25 000 civil service jobs, which will save an estimated US$155 million per annum, is very painful especially in the current circumstances where there is a high unemployment rate and increased informalisation of the economy of the economy, but it has to be made.

Government has to bite the bullet.

Also by trimming civil servants allowances, Government will be able to realise savings in the short-term.

Forgoing 2016 and 2017 bonuses, including staggering salaries, is a very brave decision that is likely to free up fiscal space.

Whilst this may be painful, it has become very necessary considering Government's current financial circumstances. However, it becomes necessary for Government to ensure that the money saved in this way is not abused or inefficiently re-allocated.

Though all these measures are thoughtful, there is need for additional interventions and far-reaching reforms in order to set a platform...