Finance and Economic Development minister Mthuli will today present the ZWL$421bn 2021 National Budget in Parliament, his third presentation since he was head hunted to lead the ministry three years ago.
The National Budget presentation comes at a time when the economy is projected to contract by 4.1% this year as it takes a battering from the effects of the Covid-19 pandemic.
The pandemic has hit economies across the globe as it spawned national lockdowns as countries battle to contain the virus.
For Zimbabwe, the hardest hit sector has been tourism which relies on international tourists with economies recording zero arrivals due to lockdowns.
While economies such as Zimbabwe have opened up by allowing airlines to resume flights, the damage has already been caused.
The Zimbabwe Tourism Authority reported this week that the tourism industry is projected to lose about US$1.1bn in tourism receipts on low international tourist arrivals.
It projects international tourist arrivals to dip by between 70% and 80%. In mining, the country’s largest single foreign currency earner, gold, is also projected to underperform this year due to disruptions caused by the Covid-19 pandemic which resulted in payment delays thereby fuelling smuggling.
While the manufacturing sector has recorded an increase in volumes aided by the availability of foreign currency from the auction system, the sector faces bottlenecks such as inadequate power supplies, antiquated machinery and high production costs.
This places the responsibility on the government to address the enablers to achieve a private sector-led economy enunciated in the new economic blueprint, the National Development Strategy 1 (NDS1), a successor to the Transitional Stabilisation Programme.
NDS1’s Macroeconomic Framework is premised on the adoption and swift implementation of bold policies and programmes aimed at achieving economic transformation through the creation of a thriving private-sector led, open and competitive economy, with sound macroeconomic policies anchored on fiscal discipline, monetary and financial sector stability, a business friendly environment which promotes foreign and domestic investment.
It is a tough act to balance the interests of various constituencies. Ncube must continue with fiscal consolidation by cutting the coat according to the size of the cloth.
The domestic debt has to be kept within manageable levels and borrowing from the domestic market should be limited to raise funding for key government programmes not for recurrent expenditures like salaries.
Borrowings from the central bank must be within the defined threshold as set by the Section 11 (1) of the Reserve Bank Act (Chapter 22:15) which states that borrowing from the central bank should not exceed 20% of the previous year’s government revenues at any given point.
At one time, the overdraft was 55% of the previous year’s revenue in violation of existing legislation.
The foreign currency auction system has brought about currency stability, stemming the runaway prices of goods and services. What is now required is to move the auction system from the central bank to the banks.
Ncube’s roadmap requires funding which is through taxation. Companies and individuals are still reeling from the effects of the Covid-19 and need some tax relief.
Ncube will raise some taxes or announce new taxes to raise additional revenue to fund growing needs.
But in doing so, Ncube has to ensure that taxation addresses the four principles espoused by Adam Smith—fairness, certainty, convenience and efficiency.
The spotlight is on Ncube.
Should he wear the populism jacket and overnight become the man of the people.
Or should he take up the cudgels in the defence of the economy by making tough, bold decisions and lay the foundation for economic growth as espoused by NDS1 and Vision 2030?
Over to you Prof!