THE era of painful austerity measures is over and the country should brace for positive growth and productivity in 2020, the Minister of Finance and Economic Development, Professor Mthuli Ncube, said yesterday.
In an interview with Zimpapers Television Network (ZTN), Prof Ncube said the painful reforms adopted by Government since late 2018 have laid a solid foundation for future economic growth with macro-economic indicators also pointing towards a favourable trajectory ahead.
The country’s economy is expected to register a growth of plus 4,6 percent in 2020, from a negative three to six percent this year, said the Minister. He said the projected growth next year would be driven by several factors.
“First of all, we expect better rains in the 2019/20 season because that will mean agricultural output will pick up again. It also means the power outages that you see will ameliorate because we can have more hydro-power when water in Kariba is up,” said Prof Ncube.
“But also, we expect the budget to be more supportive of growth. We have said the 2020 budget is about growth and productivity in the main and job creation, supporting competitiveness and of course making sure that we have shared growth.
“So, that stance on growth and productivity, away from austerity – we have done austerity and it has served us well, it has created a good base and allowed us to do a lot of reforms, which have been painful. Now we’re ready to move to the next stage, which is to stimulate growth.”
The Minister also gave a brief outline of some of the strategies to be implemented to consolidate the projected growth, which will be fully captured when he presents his 2020 national budget before the end of the year.
“We want to make sure that we give incentives for production, we want to make sure that we crowd in the private sector in financing. We want to make sure there is easier access to credit from the private sector across all the sectors. All those issues will contribute to a positive rate of growth,” said Prof Ncube.
While acknowledging industry calls to ease the tax burden by probably scrapping the two percent transactional tax, which is seen as double taxation on those already complying and its impact on increasing the cost of doing business, the Minister said the tax head would remain given its benefits to the fiscus.
“We’ll not scrap the two percent tax because it helps us on the compliance front. It is assisting in compliance by registered formal business, then there is compliance by the informal as well. So, it’s (2% tax) fantastic for compliance and it is clearly filling a gap of making sure there is compliance,” said Prof Ncube.
“In terms of lowering the tax burden, I cannot pre-announce what I will say in the budget. All I can say, generally, because we want to support growth and productivity, one of the things we will look at is obviously incentives and tax adjustments but I cannot comment on the two percent tax specifically.”
On Monday Cabinet received the Minister’s 2020 proposed Budget Strategy Paper, which took note of the ongoing reforms that are premised on the 2019 national Budget theme: “Austerity for Prosperity”, as outlined in the Transitional Stabilisation Programme (TSP). The budget strategy document also outlines notable milestones that include fiscal consolidation, monetary policy restoration, liberalisation of the foreign exchange market, re-engagement and a number of governance and structural reforms aimed at improving the business environment and supporting the productive sectors.
The year 2019 has not been good for Zimbabweans as the economy suffered from unforeseen but “severe exogenous shocks” arising from the El Nino-induced drought and Cyclone Idai, which constrained agricultural activities and electricity generation, bringing about general underperformance of the economy.
The situation was compounded by price escalation and loss of consumer buying power due to rising inflation. However, Treasury expects the situation to stabilise in the short term on the back of continued implementation of fiscal and monetary reforms, supported by structural and supply side measures.