Analysts rip into Mthuli budget

(Last Updated On: November 30, 2022)

LIVINGSTONE MARUFU

 

Finance and Economic Development minister Mthuli Ncube’s 2023 national budget will fail to  deal  with severe headwinds facing the economy, economists and business leaders have warned.

They said he diverted from a tight fiscal and monetary policy stance when he presented a ZWL$4.5 trillion budget which points to excessive spending by the government.

The budget quantum, they said,  points to high spending during the forthcoming election campaigns and could lead to runaway inflation and exchange rate.

Economist Gift Mugano said the budget was a “total disaster”.

“Just looking at the numbers, a ZWL$4.5 trillion budget is a huge jump from the original 2022 budget and these figures tell us that in 2023 the inflation spiral will continue,” Mugano said.

He added: “Citizens may need to know that the budget has been the main driver of inflation in Zimbabwe. In 2020, the government presented a budget figure of $63bn up from $8.1 bn in 2019 but went on to be overspend by ZWL$100.2bn in 2020. Inflation in the same year shot to 837%.

“Likewise, in 2021, annual inflation receded to around 57% by December but shot up to 285% in 2022 on the back of a huge budget of ZWL$1.9 trillion.

Building on this experience, it is clear that there is a causal relationship between the size of the budget and inflation developments.”

Mugano said a cash budget of ZWL$1.1 trillion for capital expenditure mainly for roads, dams and other infrastructure projects poses a serious threat to the economy mainly through exchange rate spikes and inflation.

“One major area of concern in the budget is the excessive allocation of funds to the Ministry of Finance. The Treasury allocated itself close to ZWL$200bn of which ZWL$80bn was set aside for salaries.

“There is no justification to give the Treasury a huge budget compared to productive ministries,” Mugano said.

Industry and Commerce ministry which has industry under its watch got a paltry ZWL$15bn against a salary budget of ZWL$57bn for  Agritex officers and ZWL$46bn for the War Veterans companies resuscitation.

Zimbabwe National   Chamber of Commerce CEO, Christopher mugaga weighed in saying:“With high inflationary pressures in the economy (year-on-year inflation stood at 255% in November 2022) and continued exchange rate depreciation, the 2023 National Budget is more likely to suffer from value erosion similar to its predecessor as judged by the near doubling of the initial expenditure projection of ZWL$927bn in the 2022 Mid-term Fiscal Policy Review and Supplementary Budget.”

He said there was a need to curtail inflation by controlling money supply growth, excessive expenditure, eliminating arbitrage opportunities, and in the long term, revamping local production of raw materials to cushion the economy against exogenous shocks.

 

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