Binga MP says deflation is a sign that poverty is increasing in Zimbabwe


0

Binga Member of Parliament Prince Sibanda says the current negative inflation in Zimbabwe is a reflection of increasing poverty in the country.

“Instead of celebrating that prices are re-adjusting, we should actually see that to be a reflection of the increase in the level of poverty in our economy,” Sibanda said in his contribution to the debate on Finance Minister Patrick Chinamasa’s mid-term fiscal policy review.

“It actually reflects that more and more people are unable to purchase commodities in the market. A low inflation or a deflation that we are experiencing is actually an indication that we are having more goods that are chasing less money within the economy.”

Sibanda said he had expected Chinamasa to come up with policies that would encourage demand and more consumption.

“Instead of increasing taxes on imports that come in, one expected that the Minister of Finance and Economic Development was going to reduce the taxes so that we can then stimulate more consumption within the economy.

“The danger of increasing import duties like the Minister did is that, at the end of the day we are actually increasing the poverty levels. We are also promoting inefficiency in our local production processes.”

The Binga legislator, who is from the opposition Movement for Democratic Change, said local producers were now at liberty to increase prices as they wished.

Full contribution:

MR. P. D. SIBANDA: Thank you Mr. Speaker for allowing me to also add my voice to the review of the review of the fiscal policy by the Minister of Finance and Economic Development. I am going to echo my debate basically on the rational expectations of economic agents such as the people of Binga North and generally everybody in the economy. Obviously when people heard that there is going to be a policy review or fiscal policy review, there are certain expectations that they had on what the Minister was going to do. I would like to say Mr. Speaker, when we talk of fiscal policy, there is usually expectations that the Government is going to intervene with certain instruments in order to stimulate favourable macro-economic conditions for favourable welfare outcomes in the economy.

Ordinarily, Mr. Speaker, when the Hon. Minister comes in to review the policy, the expectations are that he is going to deal with the macro-economic problems and variables such as unemployment,  depressed aggregate demand, increased productivity, increased inflow of investment and capital, general economic growth, consumption levels, saving levels; so those are the expectations that will be there outside in the economy. Therefore, as I debate, I am going to measure the policy statement that was given on Thursday, in line with these variables and problems that are expected to be dealt with by the community. The previous speakers, Mr. Speaker have spoken that indeed what we expected were policies and instruments from the Hon. Minister that would generally stimulate growth in the economy and not a downward revision of the GDP. We generally expected the Minister to pronounce policies that were going to deal with unemployment rather than increasing levels of unemployment by encouraging a flexible labour market practice in the economy.

We expected policies from the Minister that encourage aggregate demand, that encouraged more consumption by the consumers in the market and when we are talking of a deflationary economy that we have currently with an inflation of minus 2.18%. Instead of celebrating that prices are re-adjusting, we should actually see that to be a reflection of the increase in the level of poverty in our economy. It actually reflects that more and more people are unable to purchase commodities in the market. A low inflation or a deflation that we are experiencing is actually an indication that we are having more goods that are chasing less money within the economy. Instead of increasing taxes on imports that come in, one expected that the Minister of Finance and Economic Development was going to reduce the taxes so that we can then stimulate more consumption within the economy.

The danger of increasing import duties like the Minister did is that, at the end of the day we are actually increasing the poverty levels. We are also promoting inefficiency in our local production processes. We are saying, our local producers will be therefore at liberty to increase prices as they want and it means that the people who have more purchasing power because we know by the statistics of inflation that we have that it is an indication that people do not have the power to purchase whatever they want. Therefore, that power is going to be  reduced and the ability by consumers to buy is going to be reduced further. That translates to a situation where even our PDL is going to rise from the current $530 to something like $700 or $800 and poverty levels are going to increase if the stance that was pronounced by the Minister is allowed to go on. Therefore, I agree with the previous speakers that we need to revise the element of increasing import duties until at a time that we can be able to say, our own domestic industry has been capacitated enough to compete efficiently with the foreign producers.

Mr. Speaker Sir, the banning of the importation of second-hand clothes as already been said, the impact of that on the general economy is that, the majority of vendors who are the people that are keeping the aggregate demand at the level that it is currently on will no longer have disposable income to spend within this economy. Therefore, at the end of the day, it is going even to depress inflation to lower and lower levels.

Importation of second hand clothes is one of the very few sources of income that are available to Zimbabweans in these days of high unemployment rate. In my view, instead of dealing with these peripherals that the Minister touched on, I believe that it was important for the policy to touch on real issues – structural issues that are affecting this economy that we need to deal with bravely so that our economy can be able to kick start. These issues are – Hon. Kereke has just mentioned about the diamond levels, that they are not reflecting the sales of diamonds and they are also not reflecting on our BOP levels. The reason for that is that for a long time, the deals of diamonds in this country have been murky. They are not transparent.

We need to come out clearly and be transparent to the nation and say, what is it exactly that is happening in the diamond sector. Unless we begin to account for each and every sale that is coming from there, our economy will continue to be depressed. There are a lot of questions that are being asked and everybody knows that it is not very clear who Anjin is and who are the shareholders of Anjin, Mbada Diamonds or of most of the companies that are operating there and how they are operating the mining of diamonds in that area. We need therefore that  kind of transparency so that if we can deal with them, then the inflow of resources and foreign currency into the country can be increased.

Mr. Speaker, I also believe that, one issue that was mentioned by the Minister of Finance and Economic Development when he was presenting the 2015 budget was low investor confidence in the economy. Therefore, one expected that in this policy review, the Minister should have touched on the factors that are contributing towards low investor confidence in this economy. There is no way Mr. Speaker, that this economy on its own, can pull itself out of the situation that we are in, unless we get investors coming in to pour in resources in this economy.

We should be asking ourselves questions of why it is that, at a time when we are getting only about $400 million in Foreign Direct Investment, Mozambique is getting something like $8 billion and Zambia is getting something like $6 billion. Why do we remain the lowest recipients of Foreign Direct Investment even within the region? Why do we not then try to look at those factors so that we may be able to address them?

Mr. Speaker, I believe that time has come for us as a nation to be honest with ourselves. We cannot continue dilly-dallying and wanting to point fingers at others all the time without making some self introspection. We need to look at ourselves seriously and say, we are charged as leaders with the responsibility to ensure that the welfare of all those people that elected us is improved. Unless we do that and we continue to blame everybody except ourselves, Mr. Speaker, I believe that will not take us anywhere as a country.

Mr. Speaker, I also thought that some of the measures that the Minister of Finance and Economic Development was supposed to talk about are issues to do with transparency in our debt and mega-deals. I want to just give an example. Very recently, we were in Belarus to buy tractors. The question that I asked myself was, have we really made a thorough research and then discovered that the real problem that we have in this country in our economy are tractors, such that we should go and borrow more tractors. The question that I asked myself was, why are we going to borrow more tractors at a time when the Brazilian  facility of mechanisation has not yet been unpacked to everybody so that we know what kind of result we are going to expect from that facility?

Why should we go to look for tractors at a time when even the farm mechanisation programmes that we recently buried as a carcass in the RBZ Debt Assumption Bill has not been studied as to its effects? What impact did the Farm Mechanisation Programme have on the general economy? Therefore Mr. Speaker, it is my view that we need to be more transparent and we need to be more economic on issues to do with more and more debt and facilities that we are getting.

Mr. Speaker, I also believe that, one of the major problems that has continued to haunt us as a country, especially on the challenges of the economy, include budgetary indiscipline. It is only a few weeks ago that the Auditor General was reporting that about $3 billion had leaked from the economy. What measures are we taking as a country to ensure that we deal with those leakages? I believe that we also need to deal with our history. Our history includes situations where we have invaded private accounts of investors in this country and used that money for  whatever purposes without their c onsent. It is that kind of a scenario that keeps investors outside the country because they are afraid that once we walk in, their money can be simply taken away from their accounts without any recourse. Unless we deal with that kind of history that we have, investor confidence in this country will continue to be low.

Let me speak about retrenchments and downsizing Government human resources. I think we need to show serious political will in that area. We can only show that political will if we do not only retrench those that are at the bottom but we retrench ourselves up there. I believe that in times of such economic problems that we have, we cannot continue to have a Cabinet that is as huge as a Cabinet that existed in 1982, when our economy was still kicking. It is time that we need to look at ourselves and say ‘with the size of Cabinet that we have, are these ministries that we have adding any economic value to this country or we are just keeping them there?’ I am looking at a situation where one Cabinet Minister goes with a whole lot of bureaucracy behind him and the cost behind that whole ministry is so huge. Do we make an  analysis of the value being added to the economy of this country by the whole ministry or we are just keeping friends and relatives warming benches whilst the economy is not moving. So, it is my view that we need to show that serious political will. Why should we not show as a leadership that if we want to retrench the man on the ground, we can start by trimming our Cabinet? Why do we not show that we can start by saying we want to reduce our trips oversees so that we try to save the little foreign currency we have in this country. Why should we sacrifice the person on the ground all the time without sacrificing ourselves? I think that lack of political will, will not pull us out of the situation that we are in.

Finally, let me talk of the need for us to have a policy direction. Let us try to move away from policies that are hostile to investors. Honestly speaking, the Minister spoke about that but without doing anything, for example to the Indigenisation and Empowerment Act, we are not showing any serious will that we want to come up with better policies. I think we need to start by making sure we do the right  actions. Let us set aside that piece of legislation. It is a good piece of legislation in the national interest and for the people but not at this particular moment. I believe that it is time that we set it aside and start to build our economy, then after that we can then try to bring it in.

I do not agree with the previous speaker on the issue that we should throw away IMF policies. It is not the time to alienate ourselves from the rest of the world. I think this is the time that we need everybody and it is not time for us to look East only but time for us to look everywhere and bring everybody aboard to try and assist us to build our economy. Remember Mr. Speaker, when the Chinese were turning around their economy said, as long as it is a cat, black or white, if it catches mice we want it. So, let us not be selective but let us also embrace everybody and move with everyone’s policies so that we build our economy for the welfare of our people. I thank you Mr. Speaker.

(448 VIEWS)

Don't be shellfish... Please SHARETweet about this on Twitter
Twitter
Share on Facebook
Facebook
Share on LinkedIn
Linkedin
Email this to someone
email
Print this page
Print

Like it? Share with your friends!

0
Charles Rukuni
The Insider is a political and business bulletin about Zimbabwe, edited by Charles Rukuni. Founded in 1990, it was a printed 12-page subscription only newsletter until 2003 when Zimbabwe's hyper-inflation made it impossible to continue printing.

0 Comments

Your email address will not be published. Required fields are marked *