The Mid Term Budget Review
Then you have new loans for which the State is a guarantor and these must exceed $2 billion today. Interest on interest bearing liabilities at (say) 5 per cent per annum on debt levels of this magnitude would not be less than another billion dollars a year - on top of the existing fiscal deficit of a billion dollars. It is a nightmare.
The Minister boasted that maize purchases of 175 000 tonnes worth $68 million had been paid for in full. How do they do that magic in this fiscal situation? The answer is that they pay the farmers in 'plastic money' - the Reserve Bank transfers to bank accounts sums of money called US dollars but they have no backing. They appear in our bank accounts at Commercial Banks and are expressed in USD and we can try and get our money out of the bank - but in reality the money does not exist and the Minister is simply transferring the problem of paying the farmers to the Banks. It then becomes a liability on the Reserve Bank to the Commercial Banks and the liability of those banks to their clients. Ultimately, however the buck stops at the Treasury. Eventually we are going to be called upon to 'dollarize' those accounts with real money.
The same applies to the $200 million a month ($2,4 billion a year for those who cannot do the maths) which the Reserve Bank is taking out of exporters bank accounts and replacing it with electronic transfers without backing. Add all of these liabilities up and this is the fastest growing feature of our national debt.
Sustainable levels of national debt are usually set at about 60 per cent of national GDP - if the revenue figures signal the GDP at $13,4 billion in 2016, then our national debt at $30 billion is a laughable 2,2 times our GDP. With nothing to show for it instead of poverty, decaying infrastructure and shortages of water and food, we are one of the most indebted countries in the world and are unable to pay even the interest on our liabilities let alone the capital sums borrowed.
The Minister deals with the liquidity crisis, but maintains the fiction that this is caused by the trade deficit - even though we use our own money for all imports and very limited credit is involved. He also blames capital flight even though it is the near total absence of confidence in the economy that is at the root of the problem. He does not quantify the problem even though we know that in January, the total cash on hand in all banks was well over $400 million falling to less than $40 million in August - equal to just $3 per capita.
Finally he deals with the engagement process with the International Financing Institutions (the IFI's). He makes it sound as if we are still on track, still expecting to be able to settle our arrears with the three main institutions - the IMF, the World Bank and the African Development Bank. The harsh reality is that the process, into which we have sunk 4 years of hard work from 2012 to 2016, is dead in the water. New funding from any source is now impossible except where the new lending is to an agency with a possibility of repayment.
Any Chief Executive presenting this sort of half yearly report on the performance of a company would surely have to resign and hand over to new leadership or a liquidator. You cannot liquidate a country so new leadership is called for. In this case our Chief Executive was expected at the presentation; the red carpet was out, TV cameras in place and tight security all over the place. We sat and waited for 45 minutes for him to arrive - the Vice President in situ and also waiting for his majesty to arrive, but it was another no show.
We were given no explanation - just the unspoken understanding that the 'Old Man' of Zimbabwean politics was not able to function sufficiently to attend this important occasion.
Harare 10th September 2016