When Finance and Economic Development Minister, Mthuli Ncube takes his stand in Parliament next Thursday to deliver the mid-term budget review, a lot would be at stake to rescue the economy from its multi-faceted confrontations.
The full impact of the Covid-19 on the economy is yet to be ascertained but the immediate effects are already telling at both micro and macro-economic levels.
The economy was already encroaching towards dangerous waters before the pandemic with inflation skyrocketing, exchange rate pressures weighing on the new currency thus eroding its value and food shortages from the drought; all these were among major problems the Coronavirus compounded.
Earlier, the minister had set up a ZWL$ 63.6 billion budget for the year which by now calls for a thorough review.
Beginning of the year, the World Bank and government had both projected the economy to grow by 3 percent in 2020 but since then a lot has changed for the worst.
This week, the African Development Bank (AfDB) said Zimbabwe’s economy will shrink by 8 percent due to the effects of the Covid-19.
The minister is hence expected to provide reviewed growth figures as well as give a broad analysis of expected impact of the pandemic on business and the labor force as well.
Also critical, is how government will raise funds to finance various expenditure and other programs that will stimulate the economy and also finance the country’s vulnerable health care system in the face of rising Covid-19 cases.
Worryingly, efforts to raise funds through the Treasury Bill (TBs) auction have not attracted a desired response from investors.
Lastweek Friday, government only managed to raise ZWL$ 170 million out of a ZWL$ 500 million TBs issue as investors lacked appetite in the government paper.
This presents Mthuli Ncube with a massive financing gap yet there is also a need for government to avail a sustainable business rescue package enough to stimulate the economy.
As it stands, Zimbabwean government set aside a paltry ZWL$ 18 billion two months ago at a time regional peers like South Africa and Zambia recently availed R 800 billion and US$ 438 million respectively for economic stimulus.
Furthermore, the Finance Minister should have a review of the 20 percent per annum interest rate currently on the rescue package which business players and analysts have castigated to be too high for a bailout purpose.
Experts have also called for a consideration of various relief measures to struggling businesses in form of tax reliefs on companies already failing to cope with tax burden.
They argue that in as much as bailout packages are welcome in some instances, businesses with sufficient working capital will gain some breathing space if government considers awarding them tax reliefs given the slow activity in the economy post lock down.
At a micro level, the effects of Covid-19 have seen the emergence of what global economic experts refer to as “the new poor”.
In Zimbabwe, there has been an increase in poverty following a spike in job losses in the past month or so as companies restructure to stay afloat in the face of leaner business lines.
This enjoins government to review its figures for vulnerable families it has in the past two years targeting for electronic cash transfers to cushion them from poverty.
Then there is the currency question to be answered.
Cognitive to the fact that monetary policy primarily deals with matters to do with the financial matters, there is still a great need for the Minister in his mid-term budget review statement to make clarity with regards to the market trends currently unfolding.
Lately there have been a sudden shift towards use of the USD currency in the economy; particularly the government itself coming up with USD denominated fees for some services.
However, Mthuli will only be judged by how many among a plethora of boxes in front of him he manages to tick.