2022 Budget expected to balance growth, stability 

Source: 2022 Budget expected to balance growth, stability | The Herald

2022 Budget expected to balance growth, stability
Minister Ncube

Business Reporter

FINANCE and Economic Development Minister Professor Mthuli Ncube is expected to present the 2022 National Budget this afternoon with some analysts calling for a budget that balances the need to develop and grow the economy in line with the National Development Strategy (NDS 1) as well as maintain and sustain stability.

Analysts also expect the continuation of the Government stance on fiscal discipline, enhancement of the diaspora policy to boost remittances, incentives for the industry to grow the appetite for increased investments in value chain sectors and stability in power supply.

Addressing a pre-budget seminar with legislators in Victoria Falls recently, Minister Ncube hinted that the 2021 budget would largely be consistent with the priorities of NDS1.

Zimbabwe is implementing the NDS1, a five-year national economic blueprint that succeeded the Transitional Stabilisation Programme, which ended in December last year.

The medium term blue print outlines the strategies, policies, legal and institutional reforms, programmes and projects to be implemented over the five-year period, to achieve accelerated, high, inclusive, broad-based and sustainable economic growth as well as socio-economic transformation and development.

It is also key for establishing the bedrock to build and drive progress towards Vision 2030, which seeks to achieve an empowered and prosperous upper middle nation.

The successful implementation of NDS1 is also premised on a number of key success factors including consolidating macroeconomic stability during the NDS1 period, critical for enhancing certainty and confidence in the economy by anchoring exchange rate and inflation stability.

According to NDS1, priority will be to strengthen fiscal and monetary coordination, ending all quasi-fiscal activities, curbing unbudgeted expenditures and deepening market-based foreign exchange rate systems.

NDS1 is expected to be anchored on strengthening revenue collection efforts through reviewing and streamlining tax incentives, formalising the informal sector, upgrading of the audit and tax services of large taxpayers, as well as linking the Zimbabwe Revenue Authority (ZIMRA) systems with other key State agencies.

On the expenditure side, the strategy will be to strictly adhere to the approved budget limits and stop accumulation of arrears, review the subsidy policy to ensure better targeting, fast track State enterprise and parastatal reforms and full roll-out of the Public Finance Management System to ensure full utilisation.

Minister Ncube indicated he will stay on this course and maintain the current fiscal regime.

“We expect the minister to come up with measures that support the gains that we have already made in all sectors such as agriculture and infrastructure,” economist Mr Persistence Gwanyanya told The Herald in an interview yesterday.

“We also expect upward adjustment in taxation thresholds that have been necessitated by depreciation of our local currency and inflation that we experienced.”

With the civil servants salaries now around 33 percent of the total budget, much lower than what the International Monetary Fund recommended, Mr Gwanyaya said: “We expect to see more resources channelled towards cushioning the civil servants going forward. “What the Government did on paying civil servants bonuses in foreign currency was a great move and it is our hope to see this going forward.”  

Zimbabwe National Chamber of Commerce (ZNCC) chief executive Mr Chris Mugaga said with diaspora remittances now one of the largest sources of liquidity, a deliberate policy was needed to harness more resources from abroad. 

“The policy should also incentivise those living abroad to invest in capital projects,” said Mr Mugaga.

Minister Ncube said the Government will not be deviating from policies set out in NDS1, one of which was to strictly adhere to the approved budget. With line ministries’ having requested for about $3 trillion, only $900 billion would be available.

The minister said the total requests by line ministries were “beyond our capacity, and more fundamentally, pose challenges from a prioritisation point of view”.

He added that the Government would continue to be dependent on the revenue generation capacity of the economy and its ability to borrow sustainably.

The Treasury chief said the Government will not review Value Added Tax downwards saying such a move could negatively affect revenue inflows. VAT contributes 28 percent to total revenue. Expenditures such as infrastructure development, social protection initiatives and procurement of medicines, among others, could also be affected if VAT was changed.

Given the high rate of informalisation of the economy, and revenue leakages on borders, VAT remained the most efficient final tax that captures the widest range of taxpayers.

Minister Ncube promised a pro-poor budget, pointing out that priority interventions, will go towards addressing the needs of the poor which resonates with the NDS1.

He pointed out that the Government would continue to strengthen the Public Finance Management System in order to address risks to budget sustainability, especially the accumulation of domestic arrears and extra-budgetary expenditures.

Minister Ncube promised further rationalisation of the recurrent expenditures and redirecting of savings towards infrastructure development. The plan is also to rationalise subsidies and ensure that such expenditures are explicitly budgeted for, quantified and approved through the Annual Estimates of Expenditure.