Government struggles to pay farmers, creating a worrying backlog
LIVINGSTONE MARUFU
The government is struggling to pay farmers who delivered their grain to the Grain Marketing Board (GMB) out of concern that the payments might set off a fresh round of exchange rate volatility and cause the local currency to fall sharply.
There are growing concerns that the decision could impede various projects across the nation as well as the planning for the summer crops of 2023–2024.
Multiple GMB officials told Business Times that the board has a month-long payment backlog.
“We last paid the farmers who have delivered their grain on July 8, since then we haven’t been able to pay farmers due to the little amounts we are receiving from the Treasury. We don’t know what the farmers will do but we will pay according to the disbursements from the government ,” a GMB senior official said on condition of anonymity.
There are growing concerns that the decision could impede various projects across the nation as well as the planning for the summer crops of 2023–2024.
Also, local contractors are concerned with the delay in payments.
“There is a danger of not completing our work around the country as we no longer have the money to move forward. We may also lose the contracts for not completing the projects but we are not getting paid due to the government’s tight monetary stance.
“As we speak we have not been able to pay workers and the situation is tense as the employees need their money to stay motivated,” a contractor who refused to be named said.
Economist Gift Mugano said the current stability is unsustainable as the authorities are starving the economy to achieve stability.
“This is a massaged stability as you can’t starve the children and claim to be saving a great deal of money. The government should pay farmers and contractors in batches so that they can use it as a working capital for their businesses,” Mugano said.
“The authorities should allow supply and demand law to take centre stage here, not suppress supply to create demand. It’s a tragedy that the purported stability came at the expense of aggregate demand and bringing the economy to a grinding halt as people are going to the informal businesses that do not pay taxes and rates resulting in fiscus losing significant revenues,” he said.
He warned that if the current squeeze continues the country’s Gross Domestic Product will record a negative growth as the liquidity has slowed economic activities.
In his Mid Term Fiscal Policy Review, Finance and Economic Development minister Mthuli Ncube said the Treasury will maintain tight fiscal policy to achieve desired stability and growth.
“Recent fiscal and monetary measures instituted by the government were meant to re-establish stability in the foreign exchange market by containing liquidity injections in the economy, increase demand for the local currency, as well as move towards a unified market determined exchange rate through convergence of the parallel and formal exchange rates. Foreign exchange stability and convergence removes arbitrage opportunities and other distortions in the economy, reduces uncertainty and makes it easier for businesses to plan and budget for future transactions,” Ncube said.
“In case of any shock, there will be limited budget flexibility. Given the elevated expenditure risks, government will implement the following mitigatory measures which include the deepening implementation of the value for money in all public procurement, implement Single Spine Pay Policy (SSPP) to restore equity and transparency in public service pay administration;adherence to approved budget and cash budgeting among other measures.”
