PHILLIMON MHLANGA /
Finance Minister Mthuli Ncube is today expected to present his Mid-Term fiscal policy statement, which is expected to get the ailing economy, ravaged by the adverse impact of Covid-19, electricity shortages, rampant company closures, back on its feet.
The economy is also negatively affected by high unemployment rate, foreign currency shortages, plunging production levels, health care sector crisis and multiplicity of taxes.
The presentation comes at a time when the economy is projected to grow by 7.5%.
Although the Mid-Term policy statement by Ncube, who has been claiming significant progress has been made, is highly anticipated, several economists, who spoke to Business Times this week said the Treasury boss faces a myriad of economic challenges. The economists say it is a tough act to balance the interest of various constituencies.
They said headwinds were strong saying the policy should be pro-poor and pro-productive with more focus on the ailing health delivery system and stimulating demand and economic activity.
The economists also said the 2% tax on electronic transactions, which has been piling misery on citizens, should be scrapped as it is hurting the economy.
Other challenges in the economy include low industrial, little investment inflows, high cost of business and poor infrastructure.
Ncube, analysts said, should also reign in the government’s huge debt and expenditure.
Another big headache is on how to deal with government workers, who he should ensure are remunerated decently. Most of them have declared incapacitation and are threatening to go on industrial action.
The problem is that the country’s fiscal space remains severely constrained due to poor performance of revenue inflows against the background of rising recurrent expenditure and a shrinking tax base, economists said.
They said Ncube should prescribe policies and measures to breathe life into the sluggish economy.
The budget will also be judged on how it deals with State entities. The bailout of perennial loss-making parastatal is expected to be one of the topical issues Ncube needs to address.
Ncube had said there was no money to bailout these State-owned entities.
Analysts said Ncube should change the narrative of State entities and make hard decisions.
They said he should come up with credible plans to overhaul State entities, which have been draining fiscus through perennial bailout, to ensure they become financially self-sustaining.
Those hard choices include changing business models for State- entities.
The idea, analysts said, is to relieve the fiscus from carrying the burden of perennial bailouts because the fiscus is already overburdened with debt, meaning the government should expedite the sale of some parastatals.
But the analysts are questioning who would want to buy them in their current state.
The Zimbabwe National Chamber of Commerce CEO Christopher Mugaga said the review must speak to the people.
“We need the review to tackle the health sector challenges and the universal healthcare coverage for the population as the citizens can’t afford health coverage. Covid-19 is a menace and the budget must up its game to fight the pandemic,” Mugaga said.
He said Ncube should zero rate inputs, raw materials, imported information and communications technology goods and health equipment.
“The minister should not charge the duty on health and technology related products so that the fight against Covid-19 and other diseases is escalated,” Mugaga said.
He said the review must promote digital literacy as most of the people are now working from home hence there is a huge need for improved technology in the country.
The country has embarked on road rehabilitation exercises following the heavy downpours that have characterised last summer’s cropping season.
But Mugaga believes the pace was too slow as some raw materials take time to reach the intended destination due to some inaccessible roads.
Economist Gift Mugano said Ncube needed to scale up Covid-19 fighting in the budget as its effects on the economy continue to be fatal.
“We can’t talk of a mid-term budget without talking about Covid-19 fighting therefore the country needs a stimulus package to vulnerable businesses particularly Small to Medium Enterprises,” Mugano said.
“Ncube should have a relook at the taxes, he needs to remove taxes especially, the 2% tax which has choked the business for a very long time,” Mugano said.
“The businesses should breathe new air on the taxes as they have already been adversely affected by Covid -19. This will be easing the budget.”
Mugano said the Treasury boss should move away from austerity as he should increase salaries to match the obtaining economic environment.
“We have extreme poverty levels in Zimbabwe which is hovering at 49% which is not good for the country as it will be susceptible to looting and social unrest. There is a possibility as we have close to 7.9million people in extreme poverty in a small country like Zimbabwe,” he said.
Another economist, John Robertson said: “Indications from the Zimbabwe Revenue Authority (ZIMRA) show significant increases in tax revenue comparing the second quarter 2021 with the figures for the first quarter. The additional ZWL$20.1billion collected from taxpayers in the second quarter arose partly from ZIMRA’s claim that it has greatly increased its tax collecting efficiency.”
“My hope is that the minister will consider the possibility that the government has now gone too far and has become too demanding on the country’s too few taxpayers. Zimbabwe now needs to concentrate on increasing the number of formal sector workers and increasing the number of tax-paying companies so that the rates of tax per working individual and on the profits of companies can be reduced to more acceptable levels.”
The Mid Term Review is coming at a time when the government will be implementing the recently launched five year economic blueprint, the National Development Strategy 1 (2021-2025),which has succeeded the Transitional Stabilisation Programme .
Ncube expects the economy to grow by an average of 7.5% this year, despite the effects of the Covid-19 pandemic