Finance Minister Mthuli Ncube will today present the 2021 National Budget in Parliament, which is expected to get the ailing economy, ravaged by a myriad of headwinds, back on its feet.
The economy is experiencing high levels of unemployment, foreign currency shortages, plunging production levels, health care challenges, company closures and multiplicity of taxes.
Economists say the budget should be pro-poor and pro-productive with more focus on stimulating demand and economic activity.
They 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 and agricultural production, little investment inflows, high cost of business and poor infrastructure.
Economists who spoke to Business Times yesterday say Ncube should rein in the government’s huge debt and expenditure.
Another big headache is on how to deal with government workers, who are clamouring for better remuneration.
Most of them have declared incapacitation and are threatening to go on industrial action.
This comes on the back of limited fiscal space 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.
Analysts yesterday said the finance minister should come up with credible plans to overhaul State entities because they have been draining fiscus through perennial bailouts.
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, who would want to buy them in their current state, analysts asked.
Economists said the budget should enhance competitiveness of exports through tax incentives.
They said the current account was contracting because the economy was shrinking, adding there was also need to improve the economic enablers such as electricity and fuel.
“The budget should be pro-poor because most people in Zimbabwe at the moment are food insecure,” Canicio Dzingirai, an economics lecturer at the Midlands States University told Business Times yesterday.
“Since government is now looking inward, there is a need for the Finance Minister to come up with policies that cushion the private sector as a way of import substitution. So, there is a need to balance the cushion between the people and the private sector.”
Dzingirai added: “Apart from that, the government needs to invest in infrastructure. That way, it will crowd in the private sector. The private sector cannot invest where there is no infrastructure.
“Also, the minister needs to rein in recurrent expenditure. Government has been pouring much money into recurrent expenditure instead of investment. The minister should deal with this on his budget.”
Economist John Robertson said Ncube keeps on suggesting there have been successes, but there is no evidence for that on the ground, emphasizing that Zimbabwe has to attract investors to get the economy back on its feet.
“We have many proposed investments, especially mines, which plans were made many years ago. But, no investment is coming through because government policies don’t encourage investment,” Robertson said.
“There was talk of employment for the young people but very little is happening.
We need investors in this country.
That has been the problem for many years. There is also need to increase purchasing power for the people. There is also a need to restore bank viability and function properly.”
Robertson added: “In fact, the entire economy does not function well. I suspect he is going to increase tax which will further reduce the purchasing power for the people. So, there are a lot of things that need to be fixed.”
The budget is coming at a time when government will be implementing the recently launched five-year economic blue print, the National Development Strategy (NDS1 2021-2025), which will succeed the Transitional Stabilisation Programme which comes to an end next month.
This means that Ncube has to present a way forward plan that will rescue the country from the struggling economy further affected by the economic effects of the Covid-19 pandemic.
Ncube expects the economy to grow by an average of 5% annually during the life of the NDS1 to achieve the goal of transforming the economy to an upper middle-income economy by 2030.