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Preliminary position on 2009 National Budget Statement
National Association of Non-Governmental Organisations in Zimbabwe (NANGO)
February 01, 2009

Introduction

In a Press Statement released prior to the belated announcement of the 2009 National Budget the National Association of Non-Governmental Organisations (NANGO), expressed hope for a pro-poor, gender sensitive and child friendly budget statement in sympathy with the grievous humanitarian and economic conditions confronting Zimbabweans. The National budget whilst having some positive dimensions fundamentally failed to meet these expectations. In having a broad liberalisation programme, without an allied social support framework, the budget is in many ways insensitive to the plight of more than three quarters of the Zimbabwean population currently unable to meet their basic needs or actively participate in a free market.

NANGO also anticipated the advent of the dollarisation of the economy and thus raised the expectation for government to detail how resources to support a dollarised budget would be marshaled in light of the country's sustained poor economic performance. Again, the budget failed to give such indications apart from the specious anticipation of economy growth and double-digit inflation.

• Notable highlights from the budget statement include:
• Endorsement of dollarisation
• Water and sewer to be returned to the local authorities
• Liberalisation of the economy - End to price controls
• Taxation in foreign currency
• Abolishment of monopolies
• All quasi-fiscal operations liquidated by 31 December 2008

It is notable that the budget echoed Civil Society's long held demands for drastic actions in the following areas: inflation reduction; food security and productivity in agriculture; water management; guaranteed fuel and electricity supply; improved delivery of health and education services; infrastructure rehabilitation in transport (roads, railways and airports); improved telecommunication systems; efficiency of public enterprises; .stimulation of the productive sectors, notably agriculture, manufacturing, mining, tourism and construction among others; provision of housing - including for those in the public sector; and social protection. However, the current budget in spite of these good intentions, risks suffering the same problem of the previous budgets in which the identification of problems was not supported by a workable framework of implementation.

By and large the 2009 National Budget remains businness as usual, carrying over the retrogressive practices such as the top-down budget formulation process which inhibits citizen participation or input into decisions about how national resources will allocated and utilised. Most alarming is the age-old tradition of the defence vote receiving the greatest allocation of resources at 8% of the budget in spite of the facts that Zimbabwe is not at war.

A distressed context

The national budget has been announced at the backdrop of political uncertainty and social unrest. Development conditions in Zimbabwe are at an all time low since the attainment of Independence in 1980. Estimates indicate that between 5 and 7 million Zimbabweans will would require food aid in February and March. Meanwhile social service delivery capacities in the educational, health, social welfare, water and sanitation fields have all but dilapidated leaving the vast majority of Zimbabweans susceptible to economic shocks, hunger and disease. Many Zimbabweans have therefore been compelled by circumstances to resort to negative copying mechanisms such as the deference by families of investments in health and education to service food needs, thus jeopardizing the educational and health needs of the vast majority of children. The combined pressures of unemployment, the HIV/AIDS pandemic, high food prices and the intensive flight of millions of economic refugees to other countries have severely weakened citizens social security nets leaving more and more people even more vulnerable.

The National Budget as a budget

It remains a challenge to determine whether the National Budget Statement does indeed constitute a budget in the sense of it being an indication of the resources available for expenditure. There are very weak guarantees of the government's ability to finance the budget. The National Budget Statement, presented by the acting Finance Minister, has been premised on revenue projections based on positive economic growth and a balanced budget. In light of this, the projected positive economic growth of 2% is expected to enable the mobilisation of resources totaling US$1.7 Billion. However, stronger indications point out to a rapidly declining foreign currency generation base, unless drastic actions such as the effective facilitation of industrial production, international investment and good governance are urgently in place. With the agricultural sector hit by shortages of inputs and the mining sector in sustained under-production and commodity prices low, the possibility of attaining a 2% growth rate are dim. This is further compounded by the decline in the global projected economic growth- the world to around 0.5%. Foreign currency generation to pay for the government operations will be problematic.

Apart from the questionable projected capacity to mobilise resources, the Budget is premised upon a negation of the reality of hyperinflation as an inhibition to the effective implementation of the Budget. The budget thus makes a wrong or unattainable assumption that Zimbabwe's record-breaking inflation will be reduced to double digit figures in the year-end.

Contending with the Issues arising

Urban Water Supply

It is pleasing to note that the budget notes that the urban areas continue to face water and sewerage challenges - hence having lead to the cholera outbreak which had until 1 February a death toll of 3229 according to the UN. The budget highlights that the water and sewerage reticulation systems are going to be returned back to the local authorities. This is good news to the citizens of Zimbabwe. CSOs have consistently lobbied for the return of the water supply to the local authorities since the taking over by ZINWA catastrophically impacted the deterioration of the sector. Parliament has noted that the decision was a cabinet decision and not a parliament decision.

NANGO is concerned that the amount of resources that have been earmarked for the water and sewer system will not be adequate given the criticality of the situation especially the cholera outbreak. Thus international donor assistance in this area is crucial and the government has to ensure that the international donor community can rebuild the trust necessary for investments in the country. (if you take my suggestion you have to align it with the next sentence) All the major towns have had their populations ballooned, overstretching the carrying capacity of the sewer system hence the overflow of the sewer.

With the changeover to local authorities, there is need for resources to see to it that this takes place smoothly and local authorities are capacitated to undertake this crucial task.

Health Delivery System

The health delivery system is in total collapse with most of the health delivery institutions having scaled down operations while some having closed down all together. Key challenges include lack of equipment, essential consumables, drugs, salaries which do not ensure the livelihood of health sector employees, as well as skills loss due to the brain drain. At the same time medical aid insurance are no longer accepted.

Health institutions are now permitted to charge in foreign currency hence making it practically impossible for those who do not have the necessary foreign currency to access even the basic healthcare. And that is the vast majority of Zimbabweans. This move will help derail the attainment of the Millennium Development Goals (MDGs) especially MDG4 (reduce child mortality), MDG 5 (improve maternal health) and MDG 6 (combat HIV/AIDS, malaria and other diseases)

Education

A notable aspect of the budget is the remuneration of teachers (inclusive of all civil servants) in two currencies: Payment of salaries in local currency, with periodic reviews in line with cost of living developments and payment of a monthly foreign currency allowance, to facilitate access to a basket of goods and services now being charged in convertible foreign currencies. This arrangement is unlikely to incentivise the teachers since the alleged forex component will be handed out in vouchers. But vouchers which are not backed by hard currency are worth nothing - it like printing your own money on Xerox paper.

The amount of US$ 46.1 million stipulated in the budget for teaching, learning and equipment falls far short of the requirements of our educational system - especially since most equipment is non-existent since for a long time no investments in equipment was possible. There is need for the government to increase the budget allocation for the educational system to kick off. Same can be said with regard to un-adequate resources presented in the budget for the Zimbabwe Schools Examination Council to enhance the credibility of the examination system.

The new fee system for higher education - in which students are asked to pay an average of US$ 1200 will be a mammoth task for their parents or guardians. With the government not yet paying in US and it being the major employer in the country, the new measure will make higher education inaccessible to the majority. This has repercussions to the economy which critically needs the human capital after suffering the brain drain since over a decade. Thus, here is need for the government to review the fees in line with the general remuneration system in the country.

International Cooperation

Cooperating partners are crucial as evidenced in the year 2008. The international community assisted the country to the tune of US$ 50 million (2009 budget statement). This aspect shows that the country cannot continue to live in isolation. The All Inclusive Government hast to take the opportune time of its launch to reengage with the international community to rebuild trust and to seek humanitarian assistance to complement the few resources that will trickle in through the fiscus.

Food security

The National Budget Statement is unfortunately silent on the amount of resources that has been allocated towards alleviating the food crisis that has grippled the country. With the World Food Programme estimating that at least 7 million people require food aid in February and March, the budget, as the tool for distributing the national resources, should have clearly highlighted how much the government is specifically earmarking for the crucial humanitarian activities.

Even though that the dollarisation has had and will have a positive impact on stimulating an improvement of food availability the government has failed to scrutinize on the other side how the majority of people in the country not earning in foreign currency can afford to buy the goods and services. The concept of dollarised shops has only helped to assist the rich who have access to foreign currency but the poor will remain vulnerable even though the goods are in the shops. The dollarisation aspect of the shops and wholesales will work to handicap the attainment of the MDG number 1 aimed at eradicating poverty and hunger.

Defence budget

The Ministry of Defence as the norm over the years also got the bigger share of the budget. 8% of the total budget was allocated to the ministry of defence when the country is enjoying peace and tranquility. There is need to reduce the defence budget so as release funds towards the alleviation of the current humanitarian crisis.

Taxation

The budget highlight shows that the tax free income has been set at US125. Given that this figure is below the poverty datum line-the new tax measures will further compromise the positions of the very few earning the foreign currency giving a living to the majority (the rural households, the unemployed, school children, etc.) who have no access to the foreign currency. This tax measure is likely to exacerbate the humanitarian crisis. There is urgent need to review these tax brackets in order to cushion the majority in the country.

National Budget and Government of National Unity

The national budget did not take cognizance of the possibility of national unity. The vote allocation in the budget did not reflect the structure of the purported ministerial portfolios as contained in the Global Political Agreement. The implication of this is that there will be need for the incoming Finance Minister to reallocate the finances to reflect the status quo. Once reallocation takes place some ministers will gain while others will be reduced leading to the distortions on the current analysis.

Revision and Realism a must

There is need for the government to revisit the assumptions underlying the budget so that realistic goals are set. A positive growth rate and double digit inflation figures remain a milestone to be achieved hence the government should revise these projections. The resort to service charges for education, health and other basic social services in the absence of a strong social welfare system to cushion the vulnerable will exacerbate the suffering of already distressed Zimbabweans. NANGO continues to rally its membership to to support the people of Zimbabwe in mounting initiatives to improve their awareness of the important role that citizens must play in the national budget processes, and in holding authorities accountable for their economic governance of the country.

It is NANGO's considered position that the Government should give due attention to establishing the appropriate delivery mechanisms to preside over the implementation of the budget. This will compel actions such as the establishment of the Inclusive Government, restoration of international relations and promotion of good governance, anti-corruption, rule of law, respect for human and property rights as well as the creation of democratic conditions.

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