via Zim to miss growth target: Biti – DailyNews Live. 9 June 2014
HARARE – Zimbabwe’s former Finance minister Tendai Biti says government must revise downwards its 6,2 percent 2014 economic growth target to 1,2 percent on the back of depressed revenue inflows.
He said government’s revenue collections were inconsistent with its projected target, adding that the economy was in a poor state.
“There is a serious downward revision. The government of the day must immediately address Parliament in the mid-term statement where they must tell the nation the truth on the state of the economy,” he said while addressing a press conference on the state of the economy on Thursday.
”The projected growth rate of this country should be at least 1,2 percent in 2014,” Biti said.
His remarks come as the World Bank in April downgraded Zimbabwe’s economic growth target to 3,4 percent , citing low investment levels and weaker than expected growth of the mining sector.
Biti said Treasury is likely to fail to collect $2 billion by year end, hence the weaker economic growth projection.
“When we get to 31 December there will be a (negative) variance of 50 percent. We are likely to see this government failing to collect… a targeted figure of $4,2 billion,” he said.
He added: “The government has not been collecting enough amounts to finance recurrent expenditure on wages. Wages are now 120 percent of government expenditure.”
He said to date, government has collected non-income tax of $9,8 million against the budgeted $19,223 million, leaving a variance of 48,5 percent.
This comes as tax collector, Zimbabwe Revenue Authority (Zimra), has warned of a tough economic environment ahead as government faces shrinking revenue inflows.
Gershom Pasi, the authority’s commissioner-general, told Parliament that despite surpassing the 2014 first quarter revenue target by two percent, Zimra is likely to miss 2014 tax income targets.
“We are headed for serious shrinkage of revenue unless something is done soon to increase revenue in the country,” the taxman said.
“It’s a miracle that we have surpassed our first quarter target… considering the current state of the economy. Things are not well out there,” he said, adding that government must urgently act to stimulate local production.
Last year, Zimra collected a total revenue of $3,4 billion, six percent short of a $3,6 billion target.
Government registered a budget deficit of $16,8 million in February compared to a surplus of $17,8 million in January, as revenue collections declined, further reflecting the economic slow-down.
February revenues stood at $248 million against a target of $273,3 million, resulting in a negative variance of $25,3 million. The month’s expenditures amounted to $264,8 million, 58 percent of which went to government employment costs.
Value added tax contributed to the bulk of tax revenue at 33 percent, pay-as-you-earn 24 percent, excise duty 14 percent while non-tax revenue remained subdued at four percent.
This comes as Zimbabwe’s economy, expected to grow by 6,1 percent this year, is showing signs of stress characterised by deflation, lack of aggregate demand and a trade deficit that has widened to $3,5 billion.
The country — still recovering from a decade-long economic recession — currently relies on tax collections to fund its national budget, with the public service wage bill absorbing 73 percent of all government spending, leaving just 11 percent for capital investment and 16 percent for non-wage recurrent expenditure. — Business Live