Zimbabwe has discovered 160 000 plus more war veterans who are set to get gratuities and monthly pensions.
Just like in 1997 this was not budgeted expenditure. Without a magic increase in productivity and the tax base this will be financed by printing money.
On 14 November 1997 a day now commonly known as Black Friday local currency lost 75% value in a day. Then the war vets numbering about 50 000, led by Dr Chenjerai Hunzvi, armtwisted Robert Mugabe to pay lump sum gratuities even dancing kongonya at Heroes Acre and marching to Munhumutapa.
Prior to that war vets were claiming war time inflicted disabilities of as much as 80 per cent. Later, unofficially led by Chinotimba, they became the largest strata of population to get land after orchestrating audacious attacks on farmers and judges incensed by the MDC formation and Mugabe’s referendum defeat.
The debt created for land reform is US$3.5 billion payable to white farmers and US$200million awarded last week by an SA Court.
That Black Friday pensions, savings, insurance and assurance policies and long term investments from as far back as the 70s just died a death. Regardless of age everyone then started his/her working life at zero saving.
The economy will scream. This time expect complete death of the currency, accelerated inflation and exchange rate in thousands because 160k war vets is such a big leap in numbers compared to 50k of 1997.
Pensions, long term investments, savings, insurance and medical aid will die a bigger death and do so fast.
The economy will self dollarize and sovereign debt will multiply beyond the US$19 billion curtailing future growths. The little jobs in manufacturing will die, with erosion of income expect massive job actions and increase in protest vote.
We now have a total of about 200 000 war veterans which translates to a staggering 30% or so of all people above the age of 60 being war veterans. 60+ age group is estimated at 680k.
The economy will scream as this money supply added to this building of infrastructure ” nyika inowakwa newene wayo” using short term money is a disaster.
Should these war veterans be paid, I am not sure as the number is so staggering to be true.
The real challenge is that Zimbabwe is printing far too much money as compared to size of the economy and its growth.
Inflation is induced by using short term money for long term infrastructure projects, soon we have to import 400 000 metric tonnes of maize, pay 160 000 war veterans, budget a whooping us$3.5 billion to compensate ex-Rhodesian farmers and as late as last week US$200 million to compensate some farmers whose case could not proceed after Zimbabwe arbitrarily withdrew from the SADC tribunal court.
The economy will scream and with it political goodwill for a clean contest.
By Brian Sedze