In exactly a week, Finance minister Mthuli Ncube will face public scrutiny when he delivers his maiden national budget statement since his appointment in September.
The respected economist is expected to inject life into the productive sector, cut government expenditure and embark on a raft of reforms that will make Zimbabwe a preferred investment destination. He faces the urgency in making pronouncements that will stimulate economic growth while at the same protecting the vulnerable.
Ncube is a former African Development Bank (ADB) vice-president and chief economist who was thrown in the deep end by President Emmerson Mnangagwa to revive an economy that is in the intensive care unit after years of mismanagement and freefall.
Zimbabwe’s economy is in bad shape with sovereign debt set to grow by 8,69% to a record high of $20 billion by year-end because of continuous public borrowings to finance persistent budget deficits through Treasury Bills (TBs) and central bank overdrafts.
By June 30, 2018, the overdraft at the Reserve Bank of Zimbabwe (RBZ) had reached $961,29 million, while government securities, comprising TBs and bonds, amounted to $2,53 billion. At the end of the same period, budget deficit had ballooned to $1,34 billion, 406% above the $266 million deficit target and way above the statutory limit.
Recent reports have also suggested a rising inflation in the aftermath basic commodities shortages and rampant activity on the black market where rates dictate the prices of commodities through the three-tier pricing system.
Manufacturers and retailers continue to use the unscrupulous system and sometimes demand hard currency which is in short supply on the local market. The surrogate bond note has not earned the desired respect by those undertaking transactions, while the Real Time Gross Settlements (RTGS) method is being grossly abused.
The current wage bill for the civil servants makes up 91% of the total budget and that is not sustainable by any standards. That is why we applaud the austerity measures being taken by the government in trying to sanitise the wage bill by undertaking massive parastatal reforms in which the state owned enterprises will be commercialised, merged or disbanded to cut costs.
Government has begun the process of restructuring 41 state-owned enterprises with 13 set to be privatised while 12 will be listed on the Zimbabwe Stock Exchange. The rest will be departmentalised, partially privatised, commercialised or liquidated. This is a step in the right direction as many parastatals continue to hemor-rhage the fiscus.
W h i l e disbanding loss-making entities, the government must also adopt strategies to create employment through local and Foreign Direct Investments (FDI). The government can attract investment through crafting of policies that protect private property and having a currency of our own. Price distortions currently obtaining are a turn-off for investors.
Professional Business Association of Zimbabwe president Lucky Mlilo says he expects a budget that will enhance developmental and infrastructural needs of the economy.
“The budget deficit has been a cause of concern. We expect measures that will curb the increase of the deficit,” Mlilo said recently.
Between January and September Zimbabwe’s overall expenditure was $6,3 billion against the planned expenditure of $4,1 billion according to Minister Ncube, indicating a budget overrun of $2,2 billion funded by TBs averaging 10 percent interest per annum, the interest which creeps into the $2,2 billion overshot. Economic analysts are making a clarion call on government’s unsustainable expenditure that has crowded out funding of capital projects. Need we say more.
The contentious 2 percent tax issue levied on every dollar transacted electronically has caused a storm since its introduction. It was mainly targeted at the informal sector which hardly pays tax.
While we believe the tax is justified because the Treasury must feed on levies from companies and enterprises, taxing people who are not into business has been a burden to the already struggling citizens who are under the yoke of high price increases and those in the formal sector who have been paying tax all along. There is nothing wrong in reviewing the said tax during the budget presentation.
Finally, Ncube needs to highlight, in his presentation, how his budget will stimulate employment in a country that has an estimated 90 percent unemployment rate. The country will realise revenue through taxation once the industries are reopened and jobs created in the formal market.
