Friday, June 21, 2019

Professor Mthuli and Zanu PF must stop economic genocide

Views

Prof Mthuli Ncube claims that he has balanced treasury books and gvt is now recording a surplus.According to him the deficit has been wiped out and now public finances are now in surplus. But what is the significance of a surplus when the healthcare sector is collapsing and civil servants are earning poverty wages? In general public service delivery is hamstrung by austerity. Government has accummulated arrears on domestic debt.

In neo-classical or liberal economics deficits if they are monetized. They trigger all sorts of economic ills chief among which is Inflation. If we are in surplus why are prices not moving down in sympathy? Granted there are too many inflationary pressures in the Zim economy but we should see the reduction in the weight of the deficit on the inflation outlook. Reducing or eliminating the deficit alone is not sufficient. Its like jobless growth.
ALTERNATIVE SOLUTION
Fiscal stance has 3 legs. These are Revenue collection; Expenditure Reduction and Deficit Financing. Prof Mthuli is concerntrating on demand management(expenditure reduction and totally ignoring resource mobilization. The biggest sources of wealth are: savings, growth, productivity and investment. The focus should be on how to grow the cake rather than tinkering with demand management per se. It is the Supply side stupid. The accounting surplus being touted by the Minister of Finance is hollow and meangless in economic value terms. In short, the so-called budget surplus is an immoral surplus which does not make sense under this environment of hyper inflation.