Subsidies Will Complicate Economic Recovery Process- Mthuli Ncube Told

Analysts have openly criticized Mthuli Ncube’s August 1 Supplementary Budget by saying subsidies “will complicate efforts to extricate the economy from a myriad of challenges” The Standard Reports.  Mthuli Ncube presenting his supplementary budget proposed that 2.8 Billion be given to command agriculture. The transport subsidy, through the mass transportation scheme using ZUPCO busses, was also given some money despite the obvious fact that it is a loss-making venture.

A prominent analyst Kipson Gundani who spoke to The Standard said these subsidies were a fiscal burden to the government:

Subsidies especially on energy and transport are going to be troublesome. Apart from the fiscal burden, we will continue to experience interrupted supply of energy and a mediocre public transport system.

In any case, in the absence of external budgetary support, the subsidies have to be financed by local resources, so in real effect, citizens are paying for their own subsidies, hence the net effect is zero plus subsidy-related distortions.

Traditionally, the government has always subsidised agriculture yet the country remains stuck in hunger and food inadequacy. Agriculture subsidies can be very impactful if they are correctly targeted to those with ability for higher yields; otherwise it becomes a waste and cost-inefficient. I hold the strong view that putting a subsidy at the market level far outweighs subsidising inputs.

The government subsidies agriculture and energy supply in Zimbabwe and this year there was a drought and power generation is suppressed due to a number of reasons.

More: The Standard 


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