This archive report was first published on 13 November 2019.
As Zimbabwe prepares to unveil its 2020 budget, renowned economist Mthuli Ncube is facing a daunting task in his second budget as Finance Minister. The country's economy is facing numerous challenges, including drought, commodity and power shortages.
When Ncube accepted the job of Finance Minister a year ago, he pleaded with Zimbabweans to start judging him after six months. Professor Ncube, a Cambridge-trained economist and former African Development Bank vice president, was among a couple of technocrats brought in by President Emmerson Mnangagwa after last year's elections to resuscitate the faltering economy.
President Mnangagwa, who took over from long-time ruler Robert Mugabe in November 2017 following a military coup, was desperate for a magic bullet to cure Zimbabwe's economic malaise. Ncube immediately mended relations with multilateral lenders such as the World Bank and International Monetary Fund (IMF).
He helped Zimbabwe run a budget surplus for the first time in a decade and stopped printing money, which had in 2008 led to record hyperinflation and subsequent collapse of the local currency. By June this year, Zimbabwe had ended a decade of dollarisation and the implementation of a raft of economic well-meaning but largely ineffectual reforms, culminating in the issuance of new Zimbabwe dollar notes on Monday.
However, the rosy picture is not without its challenges. Inflation is officially at 300 per cent, but independent analysts suggest it is upwards of 500 per cent. Electricity is rationed for 18 hours daily, and fuel, bread, and medicines come at a premium. The local currency has lost value six times against the US dollar to 15.6 units compared to 2.5 units at introduction in February.
Hardly the backdrop Ncube would have chosen to preamble his second budget on Thursday, November 15, as he seeks to restore confidence in the economy. Having declared austerity measures that have stoked unrest in the civil service over, Ncube will be looking to bolster service delivery, including by doctors who have been on strike since September demanding their salaries be pegged to US dollars.
A morale-boosting thirteenth cheque for public servants is among items affected by the cash crunch, as it will be paid in three instalments from this month. Previously, it was paid in a lump sum. The 2020 budget will be capped at ZW$28.5 billion ($1.8 billion), adjustable upwards by 30 per cent to factor in inflation, meaning generating revenue rather than directing spending will be his key task.
That will require consolidating the reforms as a foundation to creating jobs and bolstering private sector confidence to attract new investments. Ncube does not expect a quick fix, saying the Zimbabwe dollar, for instance, will take at least two years to stabilise.
"We have to make sure that the domestic currency can return value, is very stable. That will build confidence and then markets will move away from US dollar pricing. Usually, that takes two years or so," he said.
