Economists tear off Mthuli budget

LIVINGSTONE MARUFU AND CLOUDINE MATOLA 

Multiple economists yesterday tore apart the budget proposed by Professor Mthuli Ncube (pictured), the Minister of Finance, Economic Development, and Investment Promotion, saying it would not address the current economic crisis afflicting the nation, Business Times can report.

Many issues besetting the faltering economy include numerous taxes, high cost of production, liquidity crisis, acute shortage of  foreign currency, and crippling power cuts.

In his 2024 Budget Statement, Professor Ncube faced pressure to lower taxes for the general public and businesses. Instead, among other surprises, he imposed a plethora of new taxes, such as the wealth tax, sugar tax, new fuel tax, higher toll fees, and passport fees.

Economist Gift Mugano told Business Times  yesterday that the budget  will make people  even poorer.

“The budget  presented (by professor Mthuli Ncube) would push citizens into poverty,” professor Mugano  said yesterday.

He added: “This budget is anti-people and anti-industry and it’s not a normal budget.

“The big drivers of the bread industry volumes are the vendors and tuckshops and by shutting them down it means the bread sub sector will be largely affected.

“Also some companies will be affected heavily as they mainly depend on vendors to push (their products).

“This means jobs are going to be lost.

“There are around six million people in the informal sector but we can’t shut  the people  down because they don’t have VAT certificate. That is why we are saying it’s anti-people.”

Economist and banker, Brains Muchemwa, said he anticipated the Minister would present a budget denominated in US dollars.

“The Minister (Professor Mthuli Ncube) just brought a slew of taxes without a target hence this will hit the people without knowing how much money is needed for the roads and cancer machinery,” he said.

High taxes, according to another economist Joseph Mverecha, could trigger yet another wave of inflation in the nation.

“l think the proposed measures [by Honourable Minister Professor Mthuli Ncube] if  implemented  they have a potential to drive the economy into a higher tax environment  and further  push inflation into next year. I have coloured  the macro stability  segment because l think  this will be  affected to the large degree by some of the measures and also the issues to do with social content.  Currency stability, we are experiencing a bit of stability but the drift in the economy is visible and very evident then there is no sign of this stability  in the mean time,” Mverecha  said.

He added: “As long as the parallel  market is drifting then we have problems with the  inflation. Right now for instance we see that the parallel  market  has depreciated by over 55% since July and the official  exchange rate has depreciated  by over 28% and we also seeing this widening  parallel  market  drift that’s going on in the market and corresponding to that l just put that roughly  to show how widening the parallel market  premium is. As long as we have this parallel  market  premium widening we are going  to have issues with inflation and currency stability in 2024.

“The assumptions of inflation  stability is related  to currency  stability and what we always see,  Honourable Minister ,is the prices rising very steadily but  they are being moderated perhaps  by the discounts that are  happening because of the festive season that we are in,  but we know that prices are definitely on the rise.”

The budget has too many taxes, according to former minister of finance and economic development Tendai Biti, and this will affect the general public.

Biti claimed that because the budget failed to address  the fundamentals of this economy, the document lacked relevance and was not technically sound.

“The most disturbing thing in this budget is it overtaxing the public. A small low income economy like Zimbabwe is only able to fund its budget to the tune of 15% but we are  funding the budget to around 35%.

“The wealth tax is ridiculous in that when you own a house one would have already paid capital gains tax, one pays taxes through rates and stamp duty for lawyers.

“Property is already overtaxed and it’s not  good for the people,” he said.

The Treasury team staged a massive retreat yesterday in response to a barrage of criticism for presenting a budget that does not support the impoverished.

Permanent secretary in the Ministry of Finance, Economic Development and Investment Promotion, George Guvamatanga, had a massive meltdown yesterday after facing a torrent of criticism for a budget that is anti-poor.

“…Part of the process allows the Treasury to refine the measures. Some of the measures are legal, some are technical, and others are political but eventually we need to review them and refine them so that they make sense.

“We have to quickly adjust some of the measures before the year ends as some will be effective on January 1 2024.The purpose is for us to refine the budget because the budget is for the people,” Guvamatanga said.

He added: “We do not need to be misled by the political rhetoric which say this is not a budget for the poor. For us as treasury to support the poor we need resources, we have to argue how we get the resources but only have to be understood that the revenue proposal that we have put forward are the ones supporting the expenditures, so if you remove any single revenue measure you also have to understand that you also have to remove all the expenditures, its not one sided.”

Professor Ncube acknowledged public concerns regarding the budget.

“Let me start with the comments the budget being anti -people,  not so pro- people. You know that  government spend large on the agriculture.  On agriculture sector we look at the  Pfumvudza where we provide inputs and this program is now world-wide, its recognised as very effective agriculture  system.  The majority of farmers benefiting from Pfumvudza are women so we are very pro people.

“(George) Guvamatanga will correct the zeros so when we say to the sugar people give us either US$0.02  so that we create cancer fund,  what we are looking for as government is cancer fund so that we can buy cancer equipment it means we are pro people. And the biggest part of the budget is going to the education sector this means we are for the people,” Ncube said.

Deputy Minister in the Ministry of Finance, Economic Development and Investment Promotion,  Kuda Mnangagwa, weighed in saying: “For a lot of criticism  that has been coming,  it has been cast down. When we sit down as the Ministry,technocrats,  bureaucrats,  policy makers,  it actually starts from the elderly persons. So, for example, when we look at the toll fees, we first look at what is the  cost of roads.  The amount of money that you save when you dont have to buy shocks as many times per year after changing tyres many times or involved in an accident,  it’s so much than increase in toll fees.

“But then we look at the elderly persons we then say as the ministry that how do we cushion them apart from extra revenue to build a health infrastructure and the others that will enhance our infrastructure and social protection.”

He added: “So we want to remove the notion that its an anti-people budget.  As you look at each and every paper of the tax measures,  the elderly person is either cushioned on the expenditure side or by policy.

“The ministry has made sure that the elderly persons are being taken care of. On the farmers we have proposed to have free import of fertiliser and everybody so just you can reduce your input cost. We do not want to squeeze the bones of ordinary persons.”