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Home | ZimCrisis#124 -- MDC Statements

Date: Thu, 17 Aug 2000 11:18:03 -0700
To: "Zimbabwe Crisis Mailing List":;
From: Zimbabwe Crisis
Subject: ZimCrisis#124 -- MDC Statements


Hi everyone,

Here are a couple of statements I have received from the MDC.


Craig



24th July, 2000

"THE RULE OF LAW SHOULD NOT BE APPLIED SELECTIVELY"


The election period is now over, except for those constituencies where the result will be contested. The results speak for themselves and I wish to thank all those who voted positively for change which resulted in the party securing 57 seats in Parliament. The leap to democracy officially came about on Tuesday 18 July, when 57 MDC Members of Parliament were sworn in after a hard fought campaign. I am sure you all join me in congratulating them for the opportunity to serve the nation.

As we move forward we must not forget that a lot of the suffering experienced by so many citizens was a direct result of the breakdown in the enforcement of the rule of law as enshrined in our constitution. "The rule of law should not be applied selectively."

In the post-election period, sadly we are witnessing a continuation of selective enforcement of the law. Violence and intimidation continues to be meted out in several sectors of our society, in particular the urban townships where an unofficial curfew now exits, citizens are being beaten up by the very people who should ensure their safety. For having dared to express their democratic right. Illegal farm occupations continue unabated in spite of government assurances to the contrary.

The economic suffering of the country is well chronicled and is being exacerbated by the current lawlessness. Unless this situation is immediately reversed Zimbabwe will deteriorate further to the extent that tourism will not recover, agricultural exports will not regenerate and investor confidence will remain low. This will continue to have an obvious impact on the country's capacity to earn foreign exchange-the key to resolving our economic problems. We may then expect further weakening of our currency, inflation, high interest rates, low investment, and loss of jobs.

It is against this background that I urge all Zimbabweans, and in particular those responsible for law and order to ensure that an immediate return to the rule of law is achieved. It is important that all law enforcement agents regain the confidence of the public. This can only be achieved if all reported incidents are actioned timeously and those responsible brought to account.

Zimbabwe is on a knife-edge and we should all play our part to avert disaster. I therefore urge you all to obey the rule of law, and to meticulously report all instances of illegal acts as well as insisting that law enforcement agencies carry out their duties without fear or favour. MDC will pursue these issues through Parliament and the respective agencies. Zero tolerance must be our target.


Yours Sincerely,

Morgan Tsvangirai
President, Movement for Democratic Change


----------


Response to the Minister of Finance's Short-Term Stabilisation measures announced on 3 Aug 2000


The statement was welcome in its honesty about the extent of the economic crisis and the sense it gave that the new Minister is aware of the need to address economic issues with urgency. However, a close analysis of Dr Makoni's speech gives rather less cause for optimism about the country's immediate future than the tone of the speech seemed to imply. We know that Dr Makoni is not a doctor of economics, but we had not before thought of him as a doctor of spin. Surely one spin-doctor in a ZANU-PF government is more than enough?

Dr Makoni takes as a fait accompli in his speech the 43% increase in budgeted expenditures for this year, but, as I stressed in my maiden speech, this enormous increase was not put to the previous parliament and remains ultra vires the constitution until formally submitted to and approved by this House. Presenting a revised year 2000 budget for debate and approval by Parliament has to be treated as a top priority by the in-coming government.

The economic measures the Minister referred to in his speech can be classified under 8 headings:


1. Tightened management of expenditures to prevent further cost over-runs

The Minister stated that there would be no supplementary expenditures unless matched by additional revenue sources and that cash budgeting would be introduced in 'the shortest possible time' - an indefinite phrase used twice in his speech. Cash budgeting is very stringent and could inflict even greater damage to the health and education sectors, which would further worsen the day-to-day problems of ordinary Zimbabweans. In the absence of donor support to fill the gap, significant reallocations within the budget would need to be effected before cash budgeting was introduced.


2. Govt restructuring to permanently reduce expenditure in the budget

As I made clear, again in my maiden speech, a fundamental requirement for restoring macro-economic stability is structural change within government. Dr Makoni mentioned a specific target, that public service wages and salaries should be reduced to 12,5% of GDP. Using the Ministry of Finance's own figures for this year, wages and salaries (if approved by this House) will be 18,2% of GDP and consequently a reduction of at least 30% in the civil service is what is required to reach the Minister's target. Once again the time frame the minister gave the Public Service Commission to come up with a "credible programme of rationalisation" was the same ''shortest possible time''.

This rings hollow, in that speedy action to restructure government was promised in the ESAP document, which was published in January 1991, and has been said to be imminent ever since, over the last 9 years. In fact, during this time only cosmetic reductions in the civil service have been made, while in some areas the complexity and stultifying overlapping of government functions has become worse. What has the Public Service Commission been doing all this time if it does not have a complete restructuring blueprint to hand? As was made clear by the recent announcement of ministries with no reduction in their number (17), merely a bit of reshuffling and name change, the real problem is political, an unwillingness to slim government, to give up the patronage of multiple ministerial posts.


3 National Revenue Authority

This important institution was promised in the July 1996 budget speech. What excuse can there possibly be for a further delay until January 2001 for the NRA to be operational?


4 Borrowing and Government Guarantees

The Minister's statement says that the government overdraft with the Reserve Bank will be limited to Statutory Provisions, with a ceiling equivalent to four months' of expected revenue. In terms of the Ministry of Finance's figures this would be a ceiling of $32 billion, which really is no limit at all. In addition, this provision by the Minister shoots down his earlier "cash budget" suggestion. For the cash budgeting to be meaningful, it must depend solely on raised revenue and not on further credit expansion, which is the very scourge of the country's present problems.

The Minister talks of transferring short-term high-interest debt to longer-term debt, carrying presumably a lower level of interest. However, government's first attempt to do this kind of debt swap - the issuing of the NOCZIM bonds - failed, as only half of the $5 billion offer was taken up. To solve the budgetary debt problems, the Minister would need to convert $100 billion of short-term debt and clearly this would require even more generous terms than the 50% tax-free, government guaranteed 5-year NOCZIM Bonds. The cost for tax payers of such debt swaps could be extremely high. If the strategy succeeded, interest rates might come down to say 10% while the bonds were still being serviced at 50%. This is an important issue because it could be seen as an attractive route for this ZANU-PF government to try and get out of the mess that it has created, but it would imply very high costs down the road for taxpayers and the next government, which will be MDC.

Finally under this heading, the Minister stated that government guarantees would only be given in future for viable projects. Is he thereby admitting that in the past non-viable (otherwise known as 'political') projects have been guaranteed by government, with a totally unjustified cost thereby being imposed on the Zimbabwean taxpayer?


5. Public enterprises

The Minister stated that in future the Ministry of Finance would ensure that there was timely reporting from parastatals, on the model of the private sector. Good luck to the Minister! All previous attempts by the Ministry of Finance to achieve this simple goal have failed. In any event, the problems of the parastatals, particularly as they impact on the budget, are only tangentially related to late and inadequate reporting on financial and other performance data. Government has to stop intervening in a clumsy, political way in the running of parastatals, in particular allowing them to properly price the goods and services they provide so as to avoid accumulating enormous debts which ultimately have to be paid for by consumers and taxpayers.


6. Monetary and Exchange Rate Policies

Monetary policies were announced the next day by the Reserve Bank Governor. The main elements are a lowering of the bank rate and permission for statutary reserves to be lent at concessionary rates of interest to exporters. Both of these measures are problematic in terms of the stated goal of reducing money supply growth and inflation. Whether the concession to exporters will be taken up depends on the goodwill of the banks, which will always try to make loans at higher rates of interest if possible.

Another concern is that if the Reserve Bank intends to target interest rates, which is the core policy measure in the infamous Millennium Economic Recovery Programme, then the rules of macro-economics are such that the authorities cannot at the same time successfully target the exchange rate. Yet the Minister in his speech said on the issue of the exchange rate that purchasing power parity or inflation differentials would be used. There is some confusion there, as the two approaches are not quite the same. In applying one or other, there has to be some benchmark to refer to: does the Minister consider the recent devaluation to Z$50 to the US$ has achieved that base, or is the currency still overvalued in his view?

In any event, does the Minister consider that after 10 years of the Ministry of Finance and Reserve Bank failing to benchmark the exchange rate's misalignment it has now suddenly discovered purchasing power parity, a simple textbook estimation tool, to correct Zimbabwe's exchange rate misalignment? I wish to submit that the tools the Minister is referring to are normal ex post measures of benchmarking the exchange rate. For the government to be on top of the situation, it will have to take into account all the fundamentals of misalignments and imbalances which have been created by 2 decades of economic mismanagement. The Minister did not outline these fundamentals in his speech.


7. Measures to stimulate Productive Sector especially exports

Reducing tariffs on inputs and raw materials always sounds good but, in an economy such as Zimbabwe's amounts to little more than a nice-sounding promise. It would be simple in a less diversified economy, but in the case of Zimbabwe, one firm's input is often another firm's output, so that reducing the level of protection for the first firm may put the second firm out of business. What we should be striving to achieve in tariff policy, and I quote her from official government Industry Development Policy document (page 7), is "to progressively reduce the overall levels and to narrow the spreads". This is because it is only in a regime of low, uniform tariffs that an export-oriented economy can reach its full growth potential.

In respect of exporters, they are anyway not supposed to pay duty on imported inputs. That is what Export Processing Zone, Inward Processing and Duty Drawback are supposed to achieve. The so-called incentive that the Minister announced in his speech of providing coupons for exporters to rebate their duty on imported inputs actually amounts to an admission of failure on the part of government to implement the duty draw-back scheme properly. First prize would be to get those schemes operating properly, which in the past has been promised just as soon as the National Revenue Authority is in place, rather than introducing yet another bureaucratic hurdle. Exporters are supposed to export, not to spend their time and energy battling with bureaucrats.


8. Institutional changes

The Minister announced two new institutions, one being the Economic Recovery Consultative Council. This can only be effective if it has a proper mandate to make decisions, which will then be carried out by government. It might then attract the proper representation it requires to be effective (that is government, labour and business). Otherwise it will suffer the same fate as the NECF of becoming a de facto apologist for poor economic policies propagated by government seeking to have somebody else take the blame for their impact on the economy.

The second institution is a Cabinet Committee on Investment, which would "remove impediments for investment to be attracted to Zimbabwe". The biggest single impediment to investment at present, domestic as well as foreign investment, is the absence of the rule of law in our country. To Dr Makoni's credit, he did make clear that his programme would not get anywhere unless the environment was, as he put it, "influenced by broader issues of peace, stability, law and order and confidence". What he did not do was to take any responsibility for these things. He merely said that "relevant authorities in government" were addressing those concerns. If the Minister was really concerned about 'confidence' he would commit himself to taking an active, indeed a primary role in ensuring the restoration of the rule of law in our country.

The main reason for the country's poor performance in the past has been ineffective leadership. The starting point in redressing the economic crisis has to be in convincing the public at large that government has the determination and the vision to formulate and implement coherent policies, including those where tough political decisions will be made. Dr Makoni's speech is a start, in that it admits to the state of the crisis, but the actual policy measures still leave much to be desired. More importantly, the fundamentals need to be addressed first. MDC yearns for the day when there is unambiguous action to restore the rule of law and a comprehensive economic policy package, with clearly specified dates and targets, is laid before this House. MDC would then be ready to "buy-in" (as the Minister put it) and provide our whole-hearted support to rebuilding Zimbabwe, but what has been presented thus far falls far short of what is required and is largely viewed as economic policy posturing because the political will is not there.



T. MASHAKADA
Shadow Cabinet Minister For Finance and Economic Planning
MDC Support Centre
8th Floor, Gold Bridge
Eastgate
Harare

Guqula Izenzo/Maitiro Chinja




Craig
Zimbabwe Crisis Mailing List
http://www.niner.net/zimcrisis


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