Govt vows to maintain sustainable fiscal position

GOVERNMENT’S policy thrust will be persistently anchored on maintaining a sustainable fiscal position to support structural reforms needed to guarantee inflation and exchange rate stability while enabling Treasury to finance public services within a sustainable budget framework.

Finance and Economic Development Deputy Minister Clemence Chiduwa said this yesterday in his address at the inaugural Zimbabwe Economic Development and Growth Strategy International Convention underway in Victoria Falls.

The event, which would be an annual event, began yesterday ending tomorrow under the theme, “Accelerating Economic Transformation through Evidence-based policy making.”

“Improved fiscal performance has also enabled the rebuilding of fiscal buffers that enable the country to respond to current and future shocks. “Government’s policy thrust will continue to be anchored on maintaining a sustainable fiscal position in order to support structural reforms required to ensure inflation and exchange rate stability whilst enabling Government to finance public services in an affordable and sustainable budget framework.

“Going forward priority will be to restore market confidence as well as achieve exchange rate and inflation stability,” he said.

The conference seeks to encourage innovative thinking among leading Zimbabwean researchers, development practitioners, policymakers and private sector operators on the country’s inclusive and sustainable economic development agenda.

Deputy Minister Chiduwa said the conference was an important event presenting an opportunity for captains of industry, the academia and Zimbabweans at large to reflect on the existing economic experiences and to deliberate on policies critical for accelerating the economic transformation agenda the Government has been pursuing since the advent of the Second Republic in 2017.

This theme aptly draws all and aligns with the 2023 budget strategy paper theme, which is “Accelerating economic transformation”.

At this juncture, he said since Independence in 1980, Zimbabwe has implemented several economic blueprints aimed at promoting sustainable economic developments and poverty alleviation.

Some of these blueprints include the Economic Structural Adjustment Programme from 1991 to 1995, the Zimbabwe Programme for Economic and Social Transformation 1996-2000, the National Economic Development Priority Programme (2006 -2008) and the Zimbabwe Agenda for Sustainable Social Economic Transformation (2013-2018).

“Informed by experiences drawn from these economic blueprints and various other reform programmes, the Second Republic has adopted a new transformative approach to economic management which is anchored on the national aspirations which are encapsulated in the Vision 2030.

“Vision 2030 itself is not only a collective aspiration and determination of an upper middle income society, but it is also a desire to transcend or transform to that state.

“In short, Vision 2030 reflects that deep collective desire that we all now share to transform the lives of the people of Zimbabwe as we transition to upper middle income status and this transformative agenda is well under implementation.

“The pursuit of Vision 2030 with the implementation of the Transitional Stabilisation Programme from 2018-2020 and the launch of the first two successive five-year medium term development strategies which is NDS 1 and NDS 2,”: said Deputy Minister Chiduwa.

NDS 1 centres on economic growth and stability targeting growth rates of at least five percent each year and the provision of key and transformative public infrastructure and improved service delivery.

“It is important to note that NDS 1 is now in the second-year of its implementation and notwithstanding the global and domestic shocks all the key productive sectors of the economy have witnessed increased economic activity which should result in the economy registering another growth this year.

“However, the domestic economic performance continues to be weighed down by developments in the external environment particularly in the Russia/Ukraine uncertainty and the impact of the Covid-19 pandemic and climate change,” he said.

In the 2022 mi-term budget review, Finance and Economic Development Minister Professor Mthuli Ncube reviewed downwards this year’s economic growth to 4,6 percent.

Deputy Minister Chiduwa said in the outlook, that maintaining low rates of inflation and a stable exchange rate remain the overriding policy objective for the Government and this will promote competitiveness of the domestic economy.

“Stabilisation policy measures such as a shift towards a unified market-oriented exchange rate regime or reduction in the budget deficit low recourse to the Central Bank or the overdraft facility as well as streamlining the subsidy interventions among other initiatives will continue to be refined in order to manage exchange rate volatility and inflation.”

He said the fiscal consolidation measures the Government has implemented during the past four years have also resulted in the fiscal position improving with smaller deficits being recorded in the past three years, thereby reducing the need for recourse to the Central Bank overdraft facility.

“Going forward priority will be to restore market confidence as well as achieve exchange rate and inflation stability. In this regard, the 2023 macro-fiscal framework and policy reforms will focus on sustainable fiscal management and supportive monetary policy measures, addressing structural bottlenecks whilst also sustaining external sector, transforming the economy to an upper middle-income economy by 2030 requires the implementation of an optimal mix of policies that address the reliance on the export or primary products from mining and agriculture which are vulnerable to international commodity price volatility,” said Deputy Minister Chiduwa.

An official from the Agricultural Finance Corporation (AFC) Holding Mr Joseph Mverecha who spoke about managing policy shocks and exchange rate volatility said the foundation for sustainable economic growth is macro-economic stability, which is defined as low and stable inflation as well as exchange rate stability with no currency volatility.

“Over the past three decades from Brazil to Vietnam, to China which has implemented several growth strategies, there is not a single country in the world that has sustained growth with macro-economic instability or macro-economic volatility. It is simply not possible.

“What is the source of this sustained exchange rate depreciation, currency volatility and also its implication on the economy….in the long run we tend to organise our minds along the concept that the economy is an equilibrium or is standing towards equilibrium, where there is broad balance between aggregate demand and aggregate supply not necessarily full employment equilibrium but some form of equilibrium where the economy has sort of adjusted fully to the shocks.

“I submit that if we understand how shocks are propagated in the economy it will assist us in understanding the currency volatility and exchange rate depreciation,” he said.

Earlier Dr Carren Pindiriri from the University of Zimbabwe said economic agents have memory and if the country experienced some challenges before, any small change for example, in money supply, may cause high response.

This, he said, was because economic agents have memory.

“But because of the economic memory that the economic agents have may cause the exchange rate to move faster Exchange rate is related to money supply, expectations, so reserve money targeting remains an important tool for controlling or managing the exchange rate ,” he said.-ebusinessweekly