‘Elections to rattle fiscal consolidation’
LIVINGSTONE MARUFU
Zimbabwe’s tight fiscal consolidation and a projected 5% economic growth next year faces a test as the government is expected to increase its expenditure ahead of the 2023 polls.
During the campaign years, political parties will go out of their way and come up with populist policies to appease the masses to garner support.
The government subsidises various programmes and distributes inputs, foodstuffs for free, hence spending more than they generate thereby putting pressure on its coffers.
The run up is also characterised by polarisation and induced shortages of basic commodities.
Zimbabwe National Chamber of Commerce CEO Christopher Mugaga told Business Times there is a lot of scepticism about economic growth in the election years as very limited resources will be channelled towards campaigning.
“The year 2022 is a campaign period and businesses are afraid of the spike in government expenditure associated with election business cycles. Any populist policies are highly likely to sustain the current inflationary pressures further fuelling the divergence between the official (auction) exchange rate and the parallel market rate,” Mugaga said.
He said the two main reasons behind the pessimism are the fears of other waves of the Covid-19 pandemic and the upcoming 2023 general elections.
Further, waves of the pandemic and the associated restrictions will lead to subdued economic activity, reversing any gains in recovery recorded to date.
“The status quo is attributed to uncertainty regarding the persistence of the Covid-19 pandemic and possible fiscal indiscipline during the impending election campaign period going into 2022. If these fears are not confirmed, the business confidence is likely to improve for the better next year,” he said.
In the past years, the government has distributed mechanisation equipment worth billions of dollars and given inputs to farmers which were not returned.
Farmers also have the extortionist behaviour as they have a tendency of not repaying loans as they threaten not to vote for a political party.
A significant percentage of the debt comes from the mechanisation equipment funding from Iran and other nations which extended farming equipment grants to Zimbabwe as the Reserve Bank of Zimbabwe assumed those debts and non- performing loans thereby ballooning the debt.
In his 2022 national budget presentation, Finance and Economic Development minister Mthuli Ncube said he will use ZWL$11bn for elections preparatory work.
“The country will be holding general elections in 2023 as enshrined in the Constitution and preparatory works (delimitation, voter registration and inspection) will be undertaken to ensure success of this constitutional requirement.
“The 2022 National Budget is, therefore, setting aside ZWL$7.75bn for the respective preparatory works. Additionally, the government is also allocating US$3.25bn for the holding of by-elections for vacant constituencies in 2022,” Ncube said.
In 2022, an amount of ZWL$340bn which is 41% of revenues or 7.1% of the Gross Domestic Product, has been set aside for the wages and salaries for public servants and pensions.
The government is also pursuing offering of non-monetary benefits which may include, solar projects scheme, housing and vehicle loan schemes, housing land, as well as seed money to the government employee’s Mutual Savings Fund.
An analyst who preferred anonymity said the elections will threaten the tight fiscal consolidation thrust that the Treasury has been implementing.
“The need to retain power will cause the government to spend above their means to appease urban dwellers by extending some handouts while giving inputs to the rural folk to win their hearts,” he said.
