TSP to NDS1 transition forms foundation for economic growth

by | Oct 20, 2021 | Business | 0 comments

Nevanji Munyaradzi Chiondegwa

If Zimbabwe was a farmland, Transitional Stabilisation Programme would be described as the land preparation and the sowing.

The successor to TSP, National Development Strategy 1 would be described as the appearance of the green shoots of plants from the soil or germination as the seed dies and with its death, gives birth to a new plant.

The farm allegory aptly captures the story of Zimbabwe’s journey ever since Professor Mthuli Ncube, the Minister of Finance and Economic Development took over over the reins at Treasury.

His no nonsense approach, which was part of the reforms President Mnangagwa called ‘painful but necessary,’ did not win him (Professor Ncube) many friends.
At one time when inflation went up as high as 800 percent, even people at the party that deployed him were not sure of his methods.

TSP was introduced to stabilise the economy and create a solid foundation for the next phases in the development trajectory towards the attainment of Vision2030.
These are the two Medium Term Plans, namely NDS1 and NDS2.

To Professor Ncube and indeed President Mnangagwa who stood firmly with him when many doubted his competence, TSP made notable progress including fiscal consolidation, exchange rate stability and a number of achievements in various pillars.
These issues, which were at the core of Zimbabwe’s economic ills and had forced it to stagnate.
The country has since come a long way from those notably gloomy days of inflationary free-fall.
We have for the first time since we reintroduced our own Zimbabwean dollar and we are now at a double digit inflation-wise with the recent inflation figure being at 50.23%.

Professor Ncube’s action plan for the reconstruction of the economy was bold, ambitious, audacious, disruptive as it was shocking.
The economic and public sector reforms he suggested were unprecedented.
Very few people, the President included and captains of industry continued to view the reforms initiated under TSP in the light they were meant.
The word austerity was greeted with a sharp outcry but Professor Ncube doggedly maintained that the reforms were painful but necessary for laying the foundation for consistent and rapid economic growth

The reforms which started with the onset of the Transitional Stabilisation Programme have continued through the NDS1 and have met with continued evident macroeconomic stabilisation and the rebounding of the economy through sustained fiscal discipline and monetary consolidation measures.
This has resulted in improved economic performance marked by a GDP growth out-turn which has seen a reversal of the -6% decline recorded in 2019 to a projected annual growth of 7.8%(revised up from 7.4%) in 2021.

The latest inflation figures recorded in August has seen a significant decline from 56% in July to 50% in August.
This is a massive decline from a high of 838% recorded in July 2020.

Among other successes are budget deficits which have been turned into surpluses or very small deficits which are being kept well below the 3% of GDP SADC threshold since January 2019. Cumulative surplus of ZWL$437 million (0.3% of GDP) by Dec 2019.
By 2020, a surplus of ZWL$ 20.6 billion was recorded while a surplus of ZWL$570 million was recorded for the first half of 2021.
Government which had been funding its operations via the Reserve Bank Overdraft facility no longer makes use of the Apex bank facility and the issuance of Treasury Bills is now only for the Budgeted debt levels and is only done through market-based debt issuance operations.

The much disliked austerity has had great achievements in managing the Public Wage Bill which is now below 50% of total revenues, down from 92% in 2017.
The 92% Public Wage Bill had been putting a strain on capital infrastructure development and social services.
The wage bill has been managed through rationalisation of posts, freeze on hiring, save for critical sectors/posts such as health and education.
The Ministry of Finance has managed to curb financial leakages and illicit transactions via the rollout of the Public Finance Management System controls to all departments and local levels, resulting in reduced wasteful spending and increased public accountability.

Professor Ncube pushed for and got the new Procurement and Disposal of Public Assets Act functional.
There has been a wholesale removal of fuel and electricity subsidies, with only targeted subsidies being fully accommodated in the Budget.
The Macro Fiscal stabilisation has created significant fiscal headroom which has enabled government to increase spending on public capital infrastructure such as roads, dams, bridges, schools, higher tertiary education innovation centres and student accommodation, hospitals and accommodation for the uniformed forces.
Fiscal headroom has also enabled the government to support social spending, particularly in the health and education sectors, with Zimbabwe becoming one of the coutries in the world that has had a well-managed Covid-19 response programme.

This has seen, over 11 million doses of Covid-19 vaccines have been procured, wholly funded from Government mobilised resources.
Government has begun the process of migrating the Public Service Pension scheme from pay-as-you-go- pension to a defined benefit pension scheme.
Following the allocation of an amount of ZWL$70.4 million as seed money, the pension funds now has assets worth over $13 billion at market value, of which $5 billion is in both realised and unrealised investment returns.

The pension fund was set up to reduce future fiscal risks emanating from pension obligations whilst market based returns will ensure that retiring civil servants will earn respectable market related pensions on retirement.
They say tasty beef speaks for itself and the Zimbabwean Economic reforms and recovery which have received praises from multilateral institutions including World Bank and International Monetary Fund are indeed testimony of the job well done from the suave Oxford educated Economist.