The true meaning of the ZWL800 million Budget Surplus in contemporary Zimbabwe

by Dr Tapiwa Mashakada.

Goernment accounts can either be in deficit or surplus at the end of a reporting period, whether Mid-Term or annually. To understand the operations of gvt accounts, I will refer to Chapter 17 of the Constitution of Zimbabwe which provides for Public Finance Management. The Constitution says that, all government revenue shall be put into one Consolidated Revenue Account (CRA), which is maintained at the Reserve Bank. This revenue comes from taxes, custom duties, indirect taxes such as VAT, levies and any other. This is the Revenue side of the Fiscus or its Resource Envelope. In Zimbabwe, the gvt is violating this constitutional principle by allowing other arms and departments of gvt to retain and use the collected revenue. To sanitize the process, gvt proclaims them as ” constitutional funds” when they are not. The Constitution only provides for one CRF. On the other side of the equation is the Expenditure or Appropriation Side, where all gvt expenditure must be debited to the Appropriation Account which again is maintained at the Reserve Bank. That is why central banks are called bankers to gvts. But before gvt incurs expenditure, it is enjoined by article 306 of the Constitution to seek Parliamentary Approval of the budget and its expenditures. The budget statement is actually a Consolidated Bill which morphes into 2  other bills, namely the Finance Bill or Revenue Bill that seeks parliamentary approval of the budgeted revenue and an Appropriation Bill, that seeks Parliamentary Approval of the  Ministerial  Votes and other appropriations.

Once the Budget is approved, the Minister of Finance has been given the greenlight to collect all revenue and deposit it into the CRF and draw all approv d expenditure from the Appropriation

 Account. Of course the Public Finance Management Act requires that the Minister should bring periodic budget performance reports to parliament and that the Auditor General should perform financial and value for money audits.

The difference between gvt revenue and expenditure is called The Conventional Deficit or Surplus. This is what Prof Mthuli boasts about and of having eliminated. Yet eliminating the conventional deficit and achieving a  surplus is meaningless. In the 2020 Mid-Term Budget and Economic Review, Prof Mthuli boasted that gvt had recorded a budget surplus of ZWL800 million (US$8 million). This figure is spurious for the following reasons:

(I) The budget surplus can be achieved as a nominal figure without discounting inflation or interest payments. This is why conventional budget  surpluses are misleading.

(2) The budget surplus can be achieved by not    funding the healthcare sector and other essential services.

(3) The Budget surplus can be achieved by the accrual of payment arrears, both domestic and foreign.

(4) A surplus can be achieved without factoring in other nugatory expenditures and illicit financial outflows from the national resource envelope, among other reasons

In simple terms, Prof Mthuli’s ZWL800 million surplus has not been adjusted for the (4) major underlying factors outlined above.

There is a book that is loved by first year   students of Economics, which is aptly entitled, ” How to lie with Statistics” Iam sure Prof Ncube frequently reads this amazing book. Yet economic management is not about metrics alone. Indeed it is about the impact.

Yet this fixation with eliminating the budget deficit is inspired by the neo-liberal policies dictated by the IMF and the World Bank in their Economic Stabilization Programs such as the Transitional Stabilization Program(TSP) introduced by the gvt in 2018, and the fixation to fight the last war. The whole idea of stabilization is to ruthlessly reduce or eliminate the deficit by all means necessary, by hook or crook in order to balance the books. In order to achieve this outcome, gvt is told to cut public expenditure on social spending such as health, education, social grants and remove subsidies on basic goods such as bread, mealie-meal, cooking oil, sugar, flour and so on and so forth. Stabilization policies achieve budget surpluses at a huge social and economic cost to the economy. 

Our problem is that the gvt has embraced IMF/World Bank neo-liberal  Stabilization Programs such as the TSP – line, hook and sinker.  And the results of Mthuli’s Economic Stabilization policies are bare for us to see. People are languishing in abject poverty due to the lack of social protection. Prices of goods and services have shot through the roof. Gvt has created a laisse-z- faire economy which   entails the survival of the fittest. This is wrong.

I call upon Mthuli Ncube and the entire Cabinet to stop inflicting pain and suffering on the poor people. I call upon Mthuli Ncube to stop lying to the President and Cabinet that there has to be pain first and gain later. There is no such thing like that. The legendary British Economist John Maynard Keynes says, ” in the long-term, we are all dead…”  Stabilization programs the world over have only managed to create pain and no gain.  The sooner ED realizes he is being sold a dummy by his Minister of Finance, the better. History is full of stories of removal of gvts caused by economic stabilization programs such as the TSP.

In conclusion, Zimbabwe should not celebrate the dubious ZWL80 million budget surplus that was revealed in the Mid-Term Review  Rather, we must mourn the opportunity cost of the surplus. Economists must debunk this myth of a budget surplus in a starving nation, ravaged by poor spending on the Covid response. Politics aside, Government must see the nexus between social unrest and economic stabilization and move swiftly to address the economic meltdown which has been   aided by the TSP which was introduced in 2018. In short, gvt must change its course and develop pro- poor and sustainable economic development policies. Zimbabwe  needs a developmental state which is able to do

 strategic economic planning in order to achieve a trajectory of inclusive growth and socio-economic development. Therefore, economic planning must be at the epicenter of policy formulation and implementation in Zimbabwe. Stabilization is a complete disaster in Zimbabwe. The TSP is the modern version of the Economic Structural Adjustment Program (ESAP) of the 1991-1995 which severely damaged the Zimbabwean economy.

I rest my case.

 Dr. Tapiwa Mashakada is an MDC T Member of Parliament

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