1. Mthuli & George were technocrats meant to explain Economic & Public Finance principles to the politicians. No matter how unpalatable. I am still wondering if George believes what he was saying or this is a consequence of the political culture in Zim. A cost to truth telling
2. The lay person has heard the term inflation is a tax. In public finance this is very real. Granted most Economists chose not to take this elective, it is the most important in understanding government tax and fiscal policies.
Inflation is a form of taxation. I will explain
Inflation is a form of taxation. I will explain
3. If an individual gets $1 in income, it’s theirs to spend. Tax at 25c means the individual has 75c to spend. But enjoy public goods. That’s the promise.
Government must live within 25c. But suppose government spends more than the 25c? They do so by borrowing from savers.
Government must live within 25c. But suppose government spends more than the 25c? They do so by borrowing from savers.
4. On the back of future tax revenue. They must compensate the saver/lender through real interest rates.
In other words, if government is given $1 by the frugal saver. When the saver gets back his $1, it must be able to purchase the same goods & services as before.
In other words, if government is given $1 by the frugal saver. When the saver gets back his $1, it must be able to purchase the same goods & services as before.
5. The saver forgoes consumption & saves for their pension in the future. And gives their dollar to government.
It’s government that consumes the dollar today. Suffering no prejudice. What if in a year’s time the government pays back the $1, but it can now buy goods worth 12c?
It’s government that consumes the dollar today. Suffering no prejudice. What if in a year’s time the government pays back the $1, but it can now buy goods worth 12c?
6. What if the same government produces a video claiming to subsidize the saver, paying for his transport & meals? That the saver should be grateful to the government?
What recourse does the saver have? Now that his $1 is now 12c? Does government have this right?
What recourse does the saver have? Now that his $1 is now 12c? Does government have this right?
7. Two years ago GOZ debt was $10bn, most of which could buy goods & services worth USD$10bn. It got this money from savers/pensioners, forgoing consumption for the benefit of GOZ.
Today, the $10bn can only purchase goods worth USD$100m. What happened to the rest of the money?
Today, the $10bn can only purchase goods worth USD$100m. What happened to the rest of the money?
8. That’s not all. The same GOZ pushed its TB’s to long term- meaning the $10bn borrowed two years will be repaid starting from 2023. How much will it be worth? Can MOF account for this tax?
Ps. I have not included RBZ & parastatal debt. This is equally devastating to savings.
Ps. I have not included RBZ & parastatal debt. This is equally devastating to savings.
9. Beyond the saver, it’s all income earning individuals. Take a civil servant, whom 5yrs ago didn’t require GOZ subsidies. They were happy to pay for transport& meals. Earning $500. Today, they can hardly support themselves. What happened to their $$$ while GOZ claims surplus?
10. Every public Finance professional knows their fiduciary duty to the citizen. They understand that inflation is tax. They won’t claim “surplus” when the inflation rate is 837%. It’s a fiduciary duty because ordinary tax has Parliament to oversee while inflation has none!
