ALL eyes are on Finance and Economic Development Minister Professor Mthuli Ncube as he presents his 2019 National Budget proposals in Parliament today, the first in the Second Republic. The Budget comes at a time when prices of goods and services — mainly basic commodities — have gone up significantly while foreign currency stocks have declined, resulting in intermittent shortages of fuel and basics like cooking oil and bread.
But critically, the Budget is being tabled against the backdrop of efforts to steer the country towards “Vision 2030”, which seeks to turn the economy into an upper middle earner with a per capita GDP of $3 500 and decent jobs.
Prof Ncube told The Herald after meeting top Delta Corporation officials, including CEO Mr Pearson Gowero, at their head offices last Friday that the budget will have a mix of cost-cutting measures and confidence building to re-power the economy.
Further, the Budget will announce more facilities for retooling of industries and measures to support SMEs and youths. EmpowerBank, a financial institution designed to support youths, would have its capacity strengthened.
Said Prof Ncube: “It will be a balanced budget with enough carrot and also decent stick; but hopefully more carrot than stick because we want to recreate that environment of confidence, to build confidence going forward.
“We want to regulate certain behaviours. We hope that the Budget will communicate the message of discipline. The idea is to cajole the economy as we move to the next level, as we go ahead with the mantra that we are open for business.
“We are desirous to move the economy to upper middle-income status so the budget will be an instrument of enactment towards attainment of that vision, and will carry on the following year and will keep building the way up.”
The budget is also expected to speak to trimming of Government spending, which ballooned particularly in the last seven years resulting in domestic and external debt rising to $16,9 billion, spurred by domestic borrowing largely through Treasury Bills (TBs) and overdrafts.
The stock of outstanding TBs as at June 2018 is $6,7 billion, with a maturing value of almost $8,3 billion. Prof Ncube says it is crucial to address Government finances to bring stability and predictability in the operating environment.
The budget is expected to cut Government spending, targeting principally the wage bill and foreign trips.
Said Prof Ncube: “On the internal front is the whole issue of the state of Government finances, the so-called fiscal position, which, again without stabilising that, it’s not easy for you to do business in Zimbabwe. How do you price, how do you plan, how do you run the business going out three to four years?
“So some of these fiscal measures we are talking about are meant to close that gap and clip fiscal equilibrium and move that deficit down to single digits within a period of years.
“We will be taking additional measures in the Government cost containment (wage bill). If the people of Zimbabwe decide that we will pay our tax, we as Government will have to meet them half way to contain expenditure and we are going to do that.”
Between January and June this year, the fiscal deficit was estimated at $1,4 billion and is projected to spike to $2,7 billion by year end if no corrective measures are taken.
The Transitional Stabilisation Programme (TSP), the new economic blueprint, says the fiscal deficit was a “major cause for macro-economic instability and financial sector vulnerability”.
The civil service wage bill and pension chew up to 90 percent of revenue and the intention is slash the wage bill by $200 million in next year’s budget. The wage bill would be further reduced by $130 million in the 2020 budget.
During the 2019 Budget consultations, parliamentarians called on Government to ensure there was a mechanism to track the use of “every dollar” spent so that citizens can benefit economically.
Said Prof Ncube: “It is one thing to request for money, which is really the input, but it is quite another to really follow the impact of that in terms of development.
“So this came out strongly to say, going forward, this is something that we should look out for. But quite clearly, we want to strengthen the financing of agriculture, we want to strengthen the beneficiation process in the mining sector.”
The Budget will also add voice to the restructuring of parastatals, at a time when 41 firms are set to be privatised, departmentalised, listed on the Zimbabwe Stock Exchange, merged, commercialised, while four will be ‘buried’.
Economist and University of Zimbabwe lecturer Professor Ashok Chakravati, said people were not so keen on general statements in the budget, but specific targets of what each planned fiscal intervention through the 2019 national budget will achieve.
“…the issue is to do with all the monetary measures, we have to start looking at how to deal with the whole currency situation, but maybe we cannot (entirely) deal with that in the budget because we have to (first sit down) discuss the issue and agree on the best thing to do. So let him get the fiscal side right so that it provides a good base for the future,” he said.
He said the minister will need to increase expenditure on programmes dear to the poor and vulnerable such as education and health services.
Education, the public sector wage bill and the crisis in public health care are also among the key issues expected to be dealt with.
While many have been calling for austerity measures, and policies that move away from those of the past, the last few months have shown that most constituencies are staunchly opposed to austerity policies and are only happy if such measures are implemented elsewhere.
The 2 percent tax on every electronic dollar transacted, as well as the separation of banking accounts are some of policy interventions that have divided the nation.