Harare East legislator Tendai Biti says the midterm budget review and supplementary budget presented by Finance Minister Mthuli Ncube is a fraud and a statement of misrepresentation of the state of the economic situation in Zimbabwe.
Biti said the budget is not equal to the challenges that Zimbabwe is facing arguing that the Minister is concerning himself with lipstick, mascara and foundation as opposed to allowing the economy to do its own talking.
Below is the full text of what Honourable Biti said during the supplementary budget debate:
Honourable Tendai Biti: Thank you very much Honourable Speaker Sir, for allowing me to contribute to the supplementary budget brought by the esteemed Minister of Finance on 1st August 2019, a very significant date in the country’s history. Hon. Speaker Sir, the country is reeling under the weight of crippling multiple challenges that include the challenge of macro-economic instability, that include interest rates that are so high but still below the rate of inflation; challenges that include the ugly return of hyperinflation. Inflation now as I am talking to you Hon. Speaker stands around 560 percent and challenges that include crippling power shortages, shortages that are lasting 18 hours a day, in some cases 24-hour power shortages, something that is unprecedented in the 100 or so history of modern Zimbabwe from 1888.
The majority of our people Hon. Speaker Sir, are wallowing in poverty, 79% of our people are living below the poverty datum line surviving on less than US$0.35. Hon. Speaker Sir, the supplementary budget, therefore, has an obligation to provide a campus to provide leadership, to provide direction in the face of the existence of these multiple challenges. I want to say Hon. Speaker, that one of the key challenges that is now facing Zimbabwe more than ever is the challenge of corruption. Corruption has become so accentuate, corruption has become so accelerated. Billions and billions of dollars Hon. Speaker Sir, are being lost unlike in the past where the chief infrastructures of corruption were found in the private sector in multi-national corporations, illicit financial flows. The recent character and the recent face of corruption is corruption that is taking place through Central Government itself, the corruption that is being channelled through the Ministry of Finance itself and this is a huge challenge that is affecting our country.
Now, when you measure the Supplementary Budget that was read out by the esteemed Minister of Finance on the 1st of August, 2019, vis-a-vis these challenges, with great respect you find the budget falling short being dwarfed not being equal to the challenges that we are facing. Not only that, the budget itself is a big fraud, it is an entire statement of misrepresentation of the true state of the economic affairs of our country.
I will start by the claim that we are in fact increasing the budget by ZWL$10 billion. In fact, the budget speaks of anticipated revenue of 14 billion dollars, an expenditure of ZWL18 billion. Many of us will sit here and think that we are actually increasing the budget; I actually submit that we are contracting the budget. Our budget in 2019 that we approved in this august House on the 21st of December, 2019 in the early hours was a budget expressed in USD$6 billion. Now, when you now approve a budget that is now ZWL$14 billion and when the black market rate is 1:10, it means you have reduced USD6 billion to 1,4 billion dollars. So, we are in fact shrinking the cake which is regrettable.
When you pronounce a budget, you are providing economic indicators for planners and one of the key figures you must give is the figure for GDP, is the figure for growth rate. This is the first budget in the history of budgets that actually skirts the issue of GDP growth rate. I want to refer to paragraph 68, page 25 of the Budget Statement. On that point, I also want to place on record our complaint that when the Budget Statement was read out on the 1st August 2019, it was not made available to Members on 2nd August, 2019 and we have only been given this budget a few minutes ago in this august Chamber. The practice is that once it is laid before the table, it must be available in our pigeon holes or at least in the Papers Office in the first floor – it was not available. That is not good governance and that is not good hygiene.
However, paragraph 68, page 25, it says, “in view of headwinds, the revised 2019 GDP growth is expected to be negative and even below the -2% projected under the SMP. Treasury will, therefore, keep tracking key developments in the economy with a view of making appropriate adjustments to sectoral growth profiles”.
Hon. Speaker Sir, it is not good enough to say ah! It will be below -2%. This statement must define the figure – what is the figure of the growth rate for 2019 because every planner wants it. The reason why the esteemed Minister did not pin this figure is because it is frightening. In its April Regional Economic Outlook, the IMF projected that our growth rate in 2019 will be -5, 5%. I would like to submit with great respect that our growth rate will be at least -8,5% due to a number of issues including Cyclone Idai, the crippling drought that has affected our country when it is in fact an agricultural-based economy. So, you cannot produce and present a Mid Year Statement without the growth rate, without also the growth rate of the half-year ending January to June 2019. If you are not going to present the growth rate for the half-year ending, there is no point in coming to this august House because the growth rate is the fundamental figure in economic planning.
Another myth is the much-hyped myth about the surplus. The Minister speaks of a surplus of 800 million. Hon. Speaker Sir, with great respect it is a misnomer, an error, a wrong, an omission to speak of a surplus and to boost of a surplus when you are using cash account in the context of expenses and expenditure that accrues. So, unless we graduate to accrual accounting, it is not possible in the middle of a year or in the quarter of a year to speak about a surplus when you are using cash account.
Hon. Speaker, when you are repressing allocations and disbursements to ministries and ministries are starving; there are no drugs in hospitals, there are no textbooks in schools and there are massive deficits in virtually every Ministry, you cannot boost of a surplus when you have kept the tap closed and you are not distributing even the Statutory allocations that you pronounced in your budget.
However, more importantly, Hon. Speaker, we know that the surplus is a myth because the Supplementary Budget itself provides for anticipated revenue of ZWL$14 billion and expenditure of 18 billion dollars. So, the budget itself is budgeting for a deficit of 4 billion dollars which is at least 4% of the total budget. So, there is in fact no surplus to talk about.
I want to go even to expenditure. You will see that in the half-year ending June 2018, the total expenditure was 4,2 billion dollars but if you go to the original budget as of June 2019, the actual expenditure should have been 3.8. So the Minister who is talking about a surplus and austerity in fact exceeded his expenditure limit by at least 15% being the difference between 3,8 billion and 4,2 billion dollars. So it is as smoke-screen budget marinated in this language but obfuscating and hiding the serious flows in the Budget Statement as a technical document but more importantly hiding the structural flows that are affecting our economy.
The third issue I want to speak about which is very disconcerting is the unlawful and unconstitutional devaluation that the Minister has impacted on this economy. You know Hon. Speaker, that in the last five years, this economy has been sustained by Treasury Bills. These Treasury Bills were issued in USD currency and are therefore USD paper. They constitute the bulk of our country’s domestic debt. In one sweep, the Minister has converted the USD9 billion Treasury Bills to ZWL$9 billion. This is a breach of Section 71 of the Constitution of Zimbabwe. Section 71 protects the right to protect the right to property and the right against appropriation. I want to make reference in particular to paragraph 34, page 14 of the Budget Statement where the Minister or officials write as follows; “Consequently, adherence to sound fiscal and monetary policy reforms allowed containment of domestic debt stock which stood at ZWL$8.8 billion as at the end of June 2019 down from ZWL $9.5 billion as at 3 December 2018.”
The Treasury Bills were never indexed in Zimbabwean dollar. The Zimbabwean dollar did not exist until the 20th of February 2019 when the Statutory Instrument 33 of 2019 was enacted. You cannot devalue the entire stock of domestic debt and suddenly index it in the Zimbabwean dollar. It is illegal, unconstitutional and it will have serious ramifications to the economy.
Another myth is the myth by the Minister contained on page 15 paragraphs 37 to 41 of the Budget Statement. The Minister says; “the current account for the first time since the adoption of the multi-currency regime in 2009 registered a surplus in the first quarter of 2019.
A surplus of US$196 million was registered in the first quarter of 2019 compared to a deficit of US$491 million for the same period in 2018 constituting a major improvement in the current account.”
Mr. Speaker. It is not possible to talk of a current account surplus in Zimbabwe when our GDP has shrunk by more than minus 8%. It is not possible to talk of a current account surplus when the economy is not producing; when you go to every supermarket in Zimbabwe whether it is TM or OK Bazaar and find that 60-80% of the goods are imported. It is not possible to speak of a current account surplus when we spend over US$1.5 billion of real money importing fuel when we require at least US$40 million per month to import electricity. You cannot speak of a tiny surplus created by demand suppression methods and difficulties in getting foreign currency and you boast of foreign currency.
I want to say to the Hon. Minister of Finance, do not be concerned with lipstick, mascara and foundation. Do not be concerned about figures. Let the economy itself speak truthfully – what is the proper GDP growth rate? Another lipstick issue is; it is unprecedented in the history of economics and I am not an economist – I am just a poor lawyer but it is unprecedented in the history of economics that a Minister of Finance, a whole educated Professor can suppress inflation figures. It is not possible.
The Minister does not have the power to issue a directive in terms of the Statistical Act of directing the Zimbabwe Statistical Offices (ZIMSTATS) to suspend inflation figures but more importantly from a good governance point of view, it is improper for the Minister to suspend inflation figures. What are you trying to hide? Let the economic figures speak. Disclose GDP, inflation rates and proper debt figures.
On the issue of debt, only last week this august House adopted a report by the Public Accounts Committee on serious non-compliance issues at the Ministry of Finance. One of the issues we raised was that the Minister of Finance was not bringing before this august House consolidated figures of overall debt twice a year as is required by Section 300 of the Constitution of Zimbabwe. We note with regret that practice is continuing. I associate myself with the remarks of the esteemed Chairman of the Budget and Finance Committee, Hon. Mhona that it is not good enough. The Minister of Finance must comply with Section 300 of the Constitution and supply a proper schedule of all the debt that is contracted in the name of Zimbabwe.
This is a big issue because we know that the Reserve Bank is busy contracting debt. Two years ago, this august House was forced to pass an RBZ Debt Assumption Bill of US$1.5 billion. I want to assure Hon. Members that unless we stamp our feet and our ground, the next Debt Assumption Bill from the RBZ will be bigger than US$1.5 billion. Hon. Minister Sir, please comply with Section 300 of the Constitution of Zimbabwe.
I want to move to solutions but there is one governance issue that concerns me. The Ministry of Finance seeks to allocate to itself in an unallocated reserve the sum of $1 192 384 000. Hon. Speaker, this is bad governance. The House must approve every cent in the Blue Book. When the Ministry of Finance becomes at the forefront of mafia and bad governance – it is not acceptable. The Minister must disaggregate this $1.9 billion and then distribute it to the respective ministries and not to hide zvikwambo nezvisenga imo mu $1.9 billion.
I want to move to solutions. I want to say to the esteemed Minister of Finance that this economy will not move without attending to structural reforms both political and economics. We are wasting our time Hon. Speaker, if we ignore the challenge of legitimacy and the fundamental fact that there has to be dialogue in this country.
Secondly, the Hon. Minister must attend to the structural issue of ghost workers. The wage bill is consuming about 85% of the resources. The Government must have the courage and decency of addressing the wage bill.
Hon. Speaker Sir, I want to say to the Minister of Finance and Economic Development that the move to dedollarise the economy was a disaster, a tsunami and I want to submit, Hon. Speaker, that the Hon. Minister must repeal Statutory Instrument 142 of 2019 and immediately redollarise the country. Without redollarising the country, Hon. Speaker, we are going nowhere in the short term, so I submit.
The fourth thing, Hon. Speaker, we need an urgent resolution on the Zimbabwe debt crisis. The country cannot move with a crippling debt of US$17 billion or US$18 billion. Since October 2015, the Government has been doddering with the Lima process. Lima is dead, it must be buried at Warren Hills. The IMF is wasting time with us. We need to carry out serious structural reforms so that this country can move forward, but as I said at the beginning, without political reforms we are wasting our time. I thank you very much Hon. Speaker.