IN-DEPTH: Economy at it’s best in 10years! Guvamatanga rebuts crisis claims

By Gilbert Nyambabvu

“For the first time in 40 years we have a government, and we have a President who has said that he wants to pay one million vulnerable households a social grant. We can have a debate about the amount, about inflation but are those not signs of a government in control?

“OVER the past month, this is the most stable we have seen the economy over the past ten years,” finance and economic development ministry permanent secretary George Guvamatanga declared as he gave a robust defence of the government’s record on the economy, rejecting claims by that Zimbabwe is in a crisis, the economy spiralling.

The deputy treasury chief  was speaking in the second part of an exclusive interview with the ZBC set to be broadcast Wednesday evening.

“You define an economy by fundamentals and if you look at the TSP (Transitional Stabilisation Programme), it spoke about addressing fundamentals which have been addressed,” he said.

“In the past, when the fundamentals were wrong, everybody would ficus on the fundamentals; they would say you have a high budget deficit, high current account deficit, unsustainable borrowing by government from the central bank.

“That was the narrative (but) those positions have been corrected by this current government in less than 30 months of coming into office. A current account deficit which used to average one billion dollars has now been changed to a current account surplus which means that we are now exporting more than what we are importing and this has been consistent for the past 18 months.”

Guvamatanga said prudent management of the country’s finances had seen a fiscal deficit which averaged more that 40 percent under the previous government turned into a surplus position with printing of money and resort to central bank borrowing also now a thing of the past.

Govt wage bill down to 50%, from 96%

“On this fiscal front, we do not spend money that we don’t have and, at the end of the day, over the past 18 months were have consistently had a surplus because we prioritise better, we spend better and we control wasteful expenditure better. We are ruthless, as treasury, on wasteful expenditure … (and) poor prioritisation,” he said.

“In the past we used to run budget deficits of 40 percent … 96 percent of revenues went to salaries which meant that there was only four percent to build roads.

“Civil servants did not know when they would be paid, but since this government came into office we advertise pay dates; that’s how confident we are. Instead of 96%, wages and salaries now constitute just about 60 percent.”

He also scoffed at claims by critics that the government was creating phantom electronic money in order to pay the US$75 #Covid-19 allowance for civil servants.

“We are not using phantom money, we have not created electronic U.S. dollars,” he said.

“We are using taxes and VAT to pay the allowance. We are using money collected (in foreign currency) at Beitbridge (boarder post). Are we being paid taxes by phantom money? No! Are we being paid duty by phantom money? No!

“So, I can demonstrate we have collected VAT in US dollars, we have collected duty in US dollars; that’s the money are using to pay civil servants. We have not printed electronic dollars, this government is not that irresponsible.

“People should give us credit; it’s not like we just wake up and throw things at people. There is a process about how we make decisions; a very thorough process and very consultative and guided process.”

George Guvamatanga – Finance Ministry Permanent Secretary

Guvamatanga said the achievements were remarkable, given the exogenous shocks the current government has had to deal with.

“Just look at the shocks that we have had to deal with; drought, cyclone Idai, now covid-19, no IMF, World Bank support, sanctions,” he said.

“If you look at what was thrown at us over the past two years as a new government and where we are today, the stability that we have today, the shops are full. people are trading. Over the past month, this is the most stable we have seen the economy over the past ten years.”

Legacy debts

The treasury permanent secretary bristled at claims that goods and services were cheaper and that things were generally better under the previous government.

He charged; “How do you say things were better when you were running budget deficits of over 40 percent and you were printing money left right and centre? Today do we have a budget deficit? No, we have a surplus. Are we printing money? No we are not!

“In the past 16 months we have not accessed the Reserve bank windows. The previous government, the law allowed them to access 20 percent but they were accessing 40%. We came in and said no we want discipline, let’s put it at 5% but we are actually at zero and that’s a very important fundamental.”

Legacy issues also continue to take up some 17 percent of government revenues.

“One of my challenges now is that 17% of our budget today goes into legacy issues,” said Guvamatanga.

“We took over a huge debt of electricity, we owed every one and I’m happy to report that most of the debt we have paid. It’s not true that things were better in the past. They are better now because fundamentally you pay the true value what the services and goods you are getting.

“We have a huge debt because you were buying fuel for 13cents, we don’t have oil fields here for you to buy fuel at 13 cents, but that fuel was not being paid for and we are paying for it now. So we are paying for everything that you are consuming now and that which you consumed in the past 8-10 years but paid the wrong value.”

Where is the surplus?

Guvamatanga also responded to criticism that the surplus claimed by treasury does not exist.

He said those making those allegations need to look at the money government has spent on #Covid-19 interventions without any help from either the IMF or the World Bank, in addition to social grants to the vulnerable, and subsidies to public transport and mealie meal.

“Those people who were saying you’re talking about surplus, where is the surplus … go to the Harare-Beitbridge road and you will see the surplus,” he said.

“Right now if you go to the Beitbridge-Harare road, 100km have been done. The target for this year is 200km and all of that is self-funded … we are not getting any loans – all that road development you’re seeing is funded by the government, is funded by the surplus

“We have built 23 news state of the art schools, that is the surplus. We are (developing) six major dam projects in various provinces, that is the surplus. The transport system, public transport is highly subsidised … that is the surplus.

“Meliea meal, it’s the staple food, how do we put back the surplus into the pockets of Zimbabweans … have subsidised milieu meal – that’s the surplus; that’s how were taking back into the pockets of ordinary people.”

President Emmerson Mnangagwa

He added; “For the first time in 40 years we have a government, and we have got a President who has said that he wants to pay one million vulnerable households a social grant. We can have a debate about the amount, about inflation but are those not signs of a government in control?

“So that surplus is real and it’s going to the person in Kambuzuma … they will get the money. Do we have the money to pay that grant to one million people? Yes! We don’t commit to resources that we don’t have.

“So is there a surplus? Yes, there is a surplus, and it’s that surplus which has resulted in the President of the country saying I want to help the vulnerable people.

“We have spent to date about Z$2.7 billion disbursed to deal with pandemic; we have also spent about US$3 million because, unlike other countries, we have not received support from the IMF and government.

“However, because our finances were in such a good state we were able to directly and quickly intervene and that is despite the rough, that is despite the cyclone and we have been able to do it without printing money. Everyone else despite the international support, they have had to print money. We haven’t printed money .”

Guvamatanga said treasury was also satisfied with the recently introduced foreign currency auction system but warned against errant by sections of the private sector who are pricing goods and services at black market rates despite accessing hard currency on the official markets.

“We have shown in the past that if we believe that the misbehaviour is severe we will also respond exactly in the same manner,” he said.

“What we are now expecting is that if you gate your money at 82, then price your goods at 82 and get your normal margin. Don’t go for a foreign exchange margin, you’re not a bank, you’re not a bureau de change.

“I have always accused corporates here of being foreign exchange traders; that’s what they are. We are simply saying, go back to your core business. Price your goods and services at the auction rate because that’s where you obtained the money.

“We are watching, we are monitoring. We watch developments over the next two weeks; but if there is no improvement … don’t say I did not warn you.”

President Mnangagwa’s leadership

Guvamatanga commended President Emmerson Mnangagwa for backing treasury by making politically difficult decisions which are however beneficial to the country in the long run.

“You need proper leadership to make those calls and a strong understanding of the economy to make the calls; to decide that Z$1.36 is not the correct price of fuel, this is not the correct price of electricity,” he said.

“And some times … as technocrats we are taking the position papers to the President, sometimes you are worried because you know the political implications of what you are taking there. so when you go there and he asks you questions, and he asks a lot of questions.

“Sometimes he asks you questions and he says … go back then you know that you’re in trouble. But the he eventually gets convinced and he says yes, that’s bold and proper leadership and for us as technocrats, that’s the support that has kept us going.

“So that’s one major success, to make politically unpopular decisions but which in the long run are good for Zimbabwe and for the people.”