Zim undergoes Comesa fiscal training
ZIMBABWE is one of the 12 countries in the Common Market for Eastern and Southern Africa (Comesa) trading bloc that has undergone a training programme on how to deal with fiscal risks.
Comesa is a 21-member trading bloc comprising countries such as Egypt, Kenya, Djibouti, Zambia, Burundi, Eritrea, Libya, Madagascar, and Mauritius.
In a statement, Comesa said the occurrence of fiscal risks, defined as the deviation of fiscal outturns from initial forecast, leads to additional government obligations, revenue losses, larger public debts, and occasionally, refinancing difficulties and crises.
Moreover, unexpected spending pressures or revenue losses often require disruptive ad hoc adjustments during the fiscal year.
“This challenge prevails among Comesa countries hence, addressing fiscal risks is a key element of the Comesa Multilateral Macroeconomic Surveillance Framework.
“Pursuant to this effort, the Comesa Monetary Institute (CMI) has developed a training programme on how to deal with fiscal risks.
“On June 27 to July 1, 2022, CMI organized fiscal stress testing training that brought together 35 delegates from 12 Central Banks and Ministries of Finance from the Democratic Republic of Congo, Djibouti, Egypt, Eswatini, Kenya, Malawi, Rwanda, Seychelles, Sudan, Uganda, Zambia and Zimbabwe.
“The training was aimed at providing a deeper understanding of how to deal with fiscal risks,” the bloc said.
The trading bloc said one of the key roles of a government was to develop the national budget as a guide towards achieving specific development and social objectives.
This includes determining the resource envelope namely; domestic revenue (tax and non-tax revenue), donor grants, and the borrowing needs for funding the identified priorities.
It said quite often, fiscal out-turns differed substantially from the budget forecasts, owing to factors outside the government’s control such as deviations of economic growth from expectations, terms of trade shocks, natural disasters, calls on government guarantees, among others.
“This poses challenges to the attainment of the government’s intended objectives. Fiscal stress test examines how the public finances would respond to fiscal risks. A comprehensive disclosure and analysis of fiscal risks can help governments to ensure that fiscal policy settings can respond to a range of potential future economic and fiscal shocks; those specific risks are actively monitored and managed; and that abrupt and disruptive changes in policy are avoided when risks materialise.
Fiscal stress test is therefore, an important activity that all countries are required to perform for prudent public finance management, in order to understand how public finances would respond to significant economic and/or financial shocks.
Addressing the delegates during the training programme, CMI director Mr Ibrahim Zeidy, underscored the importance of conducting fiscal stress tests in Comesa member countries.
“Countries need a more complete understanding of the potential threats to their fiscal position, in the form of a fiscal risk test that can help policy makers simulate the effects of shocks to their forecasts and their implications for government solvency, liquidity and financial needs,” he said.
The training will enhance the implementation of the Comesa multilateral fiscal surveillance framework and skills to identify specific fiscal risks and design stress test scenarios for fiscal stress test.
In an interview with this paper, an economic commentator Ms Wendy Mpofu said the training programme came at an opportune time when the Government was preparing the mid-term fiscal policy statement.
“Thumps up to our Government and the Reserve Bank of Zimbabwe officials for attending that fiscal test training programme by Comesa. It is our hope that what they learnt at the workshop will be central as they prepare the mid-term national budget.
“Going forward with the knowledge gained, we hope it is going to help them in managing public funds as well as coming up with realistic projections in the budget,” she said.
Finance and Economic Development Minister Professor Mthuli Ncube is expected to present the mid-term fiscal policy statement at the end of this month and the Treasury is assessing the possibility of a supplementary budget.
Economic analysts are on record saying a supplementary budget was inevitable and taking into account that inflation that rose to 191,6 percent last month from 131,7 percent in May eroding this year’s $927,3 billion Prof Ncube presented last November.
Meanwhile, Zimbabwe’s ranking on the Global Open Budget Survey has improved by 11 positions to 41 out of 120 countries, a testimony of the success being achieved in economic reforms under the Second Republic.
In a post-Cabinet briefing last Tuesday, Information, Publicity and Broadcasting ServicesMinister Monica Mutsvangwa said Cabinet received and noted, with satisfaction, a report on the country’s good showing in the Global Open Budget Survey, as presented by Prof Ncube.
She said Cabinet has also been informed that in terms of the quality of the budget, Zimbabwe ranks 14 points above the world average and well above all African countries.
“Cabinet announces, with immense pleasure, that Zimbabwe has improved by 11 positions from a ranking of 52nd to 41st out of 120 countries on the latest Global Open Budget Survey.
“The Survey measures the overall quality of the National Budget process, as well as the transparency and quality of consultations of the process,” she said.
Section 141 of the Constitution requires that Parliament facilitates public involvement in the national budget process.
In recent years, Parliament has been conducting the national budget consultations in
selected parts of the country to promote transparency and accountability by gathering
people’s views and aspirations on the National Budget.
Through the national budget the citizens, private sector, financial institutions, and the
Government, among other economic agencies, interact in pursuit of national objectives
and goals.-The Herald
