Treasury must not blink

As Finance Minister Professor Mthuli Ncube prepares to present the Mid-Term Budget Review, one message from economists stands out above all others that Treasury must not abandon the fiscal discipline that has restored a measure of macroeconomic stability.

For the first time in decades, Zimbabwe is beginning to enjoy conditions businesses have long yearned for, single-digit inflation, a relatively stable exchange rate and growing confidence in the Zimbabwe Gold (ZiG). These hard-won gains are no accident.

They are the product of disciplined public spending, prudent monetary management and a deliberate break from the inflationary excesses that once crippled the economy.

The latest annual inflation reading of 4.7% in June, a slight uptick from May’s 4.4%.

The country’s economic history provides a reminder of the cost of fiscal indiscipline. Whenever government expenditure has exceeded revenues and deficits have been financed through central bank money creation, inflation has surged, the local currency has collapsed and investor confidence has evaporated.

Treasury must therefore resist the demands for unbudgeted spending. Every dollar spent outside approved limits chips away at the credibility of the ZiG, whose success depends not only on reserve backing but also on confidence that fiscal and monetary authorities will remain disciplined.

This does not imply that government should neglect legitimate development priorities. Investment in infrastructure, healthcare, education and productive sectors remains essential to sustaining economic growth. However, such expenditure must be accommodated within a sustainable fiscal framework, supported by stronger domestic revenue mobilisation, improved expenditure efficiency and rigorous public financial management.

Government must also move decisively to settle outstanding payment arrears owed to contractors and suppliers. Persistent delays undermine private sector liquidity, weaken business confidence and merely transfer fiscal stress into the broader economy.

At the same time, authorities should ensure adequate liquidity within the banking sector to support productive lending and private investment.

Transparency must remain a cornerstone of economic management. Regular disclosure of ZiG reserve backing, predictable policy implementation and close coordination between Treasury and the Reserve Bank of Zimbabwe will reinforce market confidence and anchor expectations.