Economic Governance Watch 9/2024

Source: Economic Governance Watch 9/2024

Budget Documents

Introduction

At the end of last month the Minister of Finance, Economic Development and Investment Promotion presented the 2025 national budget statement in the National Assembly.  He did this in accordance with section 305(1) of the Constitution, which states:

“(1)  Every year the Minister responsible for finance must present to the National Assembly a statement of the revenues and expenditures of the Government in the next financial year.”

When the Minister presented his budget statement he tabled supporting documents, namely estimates of revenue and expenditure and a public debt report.  Then last Friday a Finance Bill and an Appropriation Bill were published in the Gazette.

We shall explain what these documents are in this bulletin.

The budget statement

This statement sets out among other things the economic and political environment in which the budget is being presented and explains the assumptions that underpin the budget.  The statement also looks at the future outlook in terms of economic growth and the overall amounts that are to be allocated or appropriated to Ministries, departments, agencies, commissions and other national institutions.

The budget statement delivered by the Minister on the 28th November can be accessed on the Veritas website [link].

The estimates of revenue and expenditure

The estimates set out in detail the Government’s estimated revenues and expenditures for the coming year, indicating the specific sectors from which the revenues will come and the proposed expenditure of each Ministry, department and agency.

Before the days of computers, the estimates were printed in a book with a blue paper cover;  hence they are colloquially called “the blue book”.

The estimates tabled by the Minister last month can be accessed on the Veritas website [link].

Debt Statement

Section 300(4)(b) of the Constitution compels the Minister of Finance to take Parliament into his confidence about the national debt.  The section reads:

“(4) The Minister responsible for finance must—

(b) at the same time as estimates of revenue and expenditure are laid before the National Assembly in terms of section 305, table in Parliament a comprehensive statement of the public debt of Zimbabwe.”

The statement must be “comprehensive”, meaning it should be complete and detailed.  It should contain the following details: the names of all lenders and the full amounts they have lent, the rate of interest payable on each of their loans, and the extent to which the State is in arrears in making repayments.  In other words, the statement should explain the country’s debt performance in sufficient detail to keep the National Assembly fully abreast of the country’s indebtedness.

Readers can assess the accuracy and completeness of this year’s statement by accessing it on the Veritas website [link].  It shows that as of the 30th September 2024 Zimbabwe’s public debt and publicly guaranteed debt amounted to US $21,1 billion.  A significant portion of this – US $12,3 billion – is foreign and the rest is domestic.

Appropriation Bill

This Bill sets out the total amount of money appropriated, or allocated, to each government Ministry and department and other institution.  The Bill is mandated by section 305(4) of the Constitution, which reads:

“(4) When the National Assembly has approved the estimates of expenditure for a financial year, … the Minister responsible for finance must cause a Bill to be known as Appropriation Bill to be introduced into the National Assembly, and that Bill must—

(a) provide for money to be issued from the Consolidated Revenue Fund to meet the approved expenditure;  and

(b) appropriate money to the purposes specified in the estimates, under separate votes for the different heads of expenditure that have been approved.”

The Appropriation Bill is brought up in the National Assembly as soon as the estimates have been approved by the Committee of Supply.  The various readings of the Bill are expedited in terms of S.O. 125 of the Assembly’s Standing Orders.

The Appropriation Bill for next year was published in last Friday’s Gazette and can be accessed on the Veritas website [link].

Finance Bill

This Bill sets out, in legal form, how the Government is going to raise the revenue needed to meet its projected expenditure in the coming year.  Most government revenue is raised through taxes and duties of various kinds, so Finance Bills amend taxing statutes – the Income Tax Act and the Value Added Tax Act, for example – to increase and adjust taxes in order to raise the necessary revenue.  Finance Bills must, according to Constitution, be confined to taxation and the raising of revenue – see Economic Governance Watch 1/2024 [link– but in recent years they have contained clauses on a wide variety of other matters.

A departmental draft of the Bill is often published as soon as the Minister has delivered his budget statement, but even if it isn’t the Bill itself should be published in time for it be passed by the National Assembly together with the Appropriation Bill.

The current Finance Bill was published in the Gazette together with the Appropriation Bill and it can be accessed on the Veritas website [link].  It proposes the following new taxes:

  • Rental Income Tax:  Properties converted from residential to business use will attract a 25 per cent tax on their rental income.
  • Betting Tax:  A 10 per cent withholding tax on gross winnings of sports betting punters, effective from the 1st January, 2025.
  • Fast Foods Tax:  A 0.5 per cent tax on the sales value of fast food items like pizzas, burgers and French fries, effective from the 1st January, 2025.
  • Plastic Carrier Bag Tax:  A 20 per cent tax on the sale value of plastic carrier bags, to promote biodegradable alternatives.

These last two taxes in particular are directed less at increasing State revenues and more at achieving socially beneficial results such as encouraging people to eat healthy foods rather than fast foods and promoting biodegradable bags over plastic bags.

Conclusion

The above-mentioned statements or documents are what makes up the national budget. It should be noted that the National Assembly has the power to approve, amend or reject the Minister’s proposals during debate.  This seldom happens, however, partly because of time constraints imposed by the Assembly’s Standing Orders.

The 2025 budget is currently under debate in National Assembly and technically the budget should be passed before the end of January 2025.

Veritas makes every effort to ensure reliable information, but cannot take legal responsibility for information supplied.

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