Biti says Zimbabwe is suffering from fiscalitis- “tinodya mari semushonga womusana”

Madam Speaker, the second man made challenge that we have in this country is that of a huge budget deficit that is now in excess of 25% of Gross Domestic Product [GDP].  We spend money as if it grows on trees and I always argue that there is a disease in this country called, fiscalitis.  Fiscalitis is the disease when you just spend and spend and spend and like we say at rallies, ‘tinodya mari semushonga wemusana’, and this is the scourge of the budget deficit.

Madam Speaker, most countries, including the United States of America run budget deficits, so the challenge is not budget deficit but is twofold.  First, what are you putting the resources to?  The challenge with our deficit is that we have been implementing deficit economics for consumption.  So we have been creating budget deficits to hire luxury jets, buy cars, bribe the population in elections and have not been building schools, dams, roads and power stations.  So when you have a budget deficit – [HON. MEMBERS: Inaudible interjections.] –

Hon. Chinotimba having stood up.

THE HON. DEPUTY SPEAKER: Order, order!

HON. BITI:  Chinotimba chimbondisiya ndidhibhete shamwari, handiti ucha dhibheta.  – [HON. MEMBERS: Inaudible interjections.] –So that is the challenge Madam Speaker, we have been running a budget deficit to finance consumption and not to finance developmental projects and the social agenda.

The second challenge of our deficit is how we have sought to monetize it and cover the gap.  We have sought to monetize the budget deficit through creative illegal means.  The first means has been to borrow from the central bank. As I am talking to you right now, the Government is running an overdraft facility at the Reserve Bank of Zimbabwe (RBZ) that is standing at US$2.4 billion.  – [HON. MEMBERS: Inaudible interjections.] – Madam Speaker, the central bank is not a commercial bank.  However, the central bank is broke and under capitalised.  So when the Government borrows from the central bank, in fact it is not borrowing from the central bank.  It is in fact raiding peoples’ deposits that are put in peoples’ accounts that are then kept at the central bank.  This is why there is a cash shortage and why you cannot get your money.  So the problem is now manifesting itself as a monetary problem yet it is a fiscal problem rising from a Government that is monetizing its budget deficit creatively and illegally through raiding peoples’ RTGs balances and peoples’ nostro accounts.

So the shortage of cash and the currency crisis that we have must fall squarely on the shoulders of the Ministry of Finance and Economic Development that has been raiding the central bank and fortiori deposits kept by persons in their accounts. – [HON. MEMBERS: Hear, hear.] – So that is problem number one.

The second problem that is associated with the huge fingerprint of Government in the economy is that of the broad money supply.  What economists call, M3.  Since 2013 money supply has grown up to $5bn due to Government borrowing. On Friday last week, the Minister of Finance and Economic Development launched what they called the Transitional Stabilisaton Programme and that document actually discloses that as of that Friday, broad money supply was in excess of $11bn. Of that $11bn, $8bn is just Government activity. The problem of a huge Government fingerprint in the economy is that you are crowding out the private sector from participating in the economy. The Government which is a non-productive entity becomes the biggest and dominant player in the economy.

When money grows faster than production as is the case in Zimbabwe, then you have inflation. So, you are back to 2008, a situation where there is too much money chasing too few goods because of an over grown broad money supply, M3. We need to curtail the growth of money supply.

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