eBusiness Weekly
Kudzanai Sharara
Government agencies and line departments will have to play a critical role if the Transitional Stabilisation Programme (TSP), launched by Finance and Economic Development Minister Professor Mthuli Ncube is to be successful.The Transitional Stabilisation Programme (TSP) seeks to operationalise ‘Vision 2030’, which will see Zimbabwe becoming a middle-income country with a per capita income of US$35 00 per person.
The programme is aimed at making sure policy reform initiatives of the new dispensation stimulate domestic production, exports, rebuild and transform the economy to an upper middle-income status by 2030.
According to the policy document, the TSP will focus on the following factors: Stabilising the macro-economy, and the financial sector; introducing necessary policy and institutional reforms to translate to a private sector-led economy; addressing infrastructure gaps, and launching quick-wins to stimulate growth.
The short-term programme will be superseded by two 5-year development strategies, with the first one running from 2021-2025, and the second covering 2026-2030.
However, according to American credit rating agency Moody’s Investors Service (Moody’s) the programme will have to rely on the ability of various Government agencies and line departments to play anchor roles if it is to ultimately deliver on the ambitious fiscal consolidation and social development targets.
Moody’s described the TSP as a high-level plan that includes programme-implementation architecture and a relatively detailed set of implementation matrices.
However, the credit rating agency said the TSP “will rely heavily on the ability of various Government agencies and line departments to ultimately deliver on the ambitious fiscal consolidation and social development targets.”
It said, although the TSP underscores the Government’s commitment to restore creditworthiness, delivering on the programme objectives will be challenging.
Moody’s said the country’s low Worldwide Governance Indicators suggest that its ability to implement such an ambitious programme is constrained.
Moody’s also noted that the stabilisation programme, which includes public spending supporting development, is likely to be hamstrung by inability to secure financing needed for such expenditure in order to achieve such inspirational growth targets.
Moody’s also raised caution on Government’s ambition to reduce the budget deficit to 3,5 percent of GDP by 2020.
“Although the Government announced a plan to raise revenue through a 2 percent money transfer tax, reducing the deficit to 3,5 percent of GDP by 2020 relies almost exclusively on expenditure cuts, which will be difficult when half of Government spending is on wages and salaries — one of the highest civil servant wage bills in Africa.”
In 2019, Government is targeting a budget deficit of $1,6 billion or 5 percent of GDP. Government plans to achieve this through fiscal consolidation measures that include weaning off parastatals, reducing the number of foreign missions and retiring youth officers, among other measures. The credit rating agency said access to new concessional funding from international financial institutions will be critical to deliver on many of the broader economic and social development objectives outlined in the TSP, such as priority infrastructure projects in energy, water and sanitation, transport and communication, health, education, and agriculture.
“The clearance of approximately $2 billion of arrears to the African Development Bank (Aaa stable and the World Bank (IBRD) (Aaa stable), in particular, is a precondition for Zimbabwe’s access to new concessional funding from international financial institutions.
“Zimbabwe is currently ineligible for debt relief under the Heavily Indebted Poor Countries (HIPC) or Multilateral Debt Relief Initiative (MDRI), although Minister Ncube has stated intention to pursue multilateral debt relief akin to that achieved by Myanmar (which secured debt relief of around $6 billion in 2013),” reads Moody’s comment.
