ZIMBABWEANS should brace for more price hikes after Finance minister Mthuli Ncube increased excise duty on petrol and diesel as fundamentals pointed to a worsening economy despite token measures to contain expenses.
BY BLESSED MHLANGA /VENERANDA LANGA/FIDELITY MHLANGA
Duty on vehicle imports will now be paid for in foreign currency, as Ncube sought to widen the foreign currency dragnet in his $8,2 billion budget.
Revenue collection is projected at $6,6 billion, while employment costs are seen gobbling $4,05 billion, with capital expenditure taking $2,02 billion, while a budget deficit of $1,57 billion is expected, from $2,8 billion this year.
Inflation is seen rising to 25,9% at year-end before sliding down to 5% next year, while the budget deficit is projected to reach $2,86 billion, 11,7% of gross domestic product (GDP), against a target of $793 million, but is seen falling to 5% in 2019.
Ncube told Parliament that the economy would grow by 4%, lower than the previous forecast of 6,3% after economic activity sharply contracted in the second half of the year.
The budget, which was themed Austerity for Prosperity, sees government chopping salaries for top civil servants, parastatal heads, commissioners, ministers and the President by 5%, saving $91,8 million on the wage bill.
With the majority of people bearing the brunt of tax increases, the measure is largely seen as tokenism.
Government will also retire civil servants aged 65 years and above and dismiss youth officers who are perceived as mainly “Zanu PF foot soldiers”.
Ncube also proposed introducing a biometric data system to capture civil servants to weed out ghost workers, who are often blamed for the excessive wage bill, while bonus payments will be based on basic salaries.
“The budget emphasises on living within means by instilling fiscal discipline and rationalising expenditures in order to create additional financial capacity for funding developmental expenditures and enhancing delivery of public services,” Ncube said.
The number of foreign missions will be cut, making savings of $50 million annually as part of measures to bringing the budget deficit to 5% next year.
Prices of motor vehicles and fuel are expected to shoot up following an upward review of duties levied in the new budget statement.
Second-hand car importers, excluding commercial vehicles, will now pay duty in hard currency, as opposed to using real time gross settlement and bond note.
The imports surged 69% between January and August this year to 45 368, from 26 781 in the same period in 2017, while chewing an average of $454,77 million in foreign currency annually, according to the Central Vehicle Registry.
“In order to redirect use of scarce foreign currency to the productive sectors of the economy, the budget proposes that customs duty and all other taxes on imported motor vehicles be levied in foreign currency acceptable as legal tender, with effect from November 23, 2018. This measure will, however, not apply on imports of commercial motor vehicles and vehicles for use by the physically-challenged,” he said.
Traffic law offenders will now pay fines of up to $700, up from $30 in an effort to deter road traffic offences.
“These traffic offences, which have contributed to the high levels of carnage, attract fines up to a maximum of level 3, with a monetary value of $30. In order to promote road safety culture by adhering to road traffic regulations, the budget proposes that any person who commits such offences be liable to fines of levels 8 to 10, which attract a maximum fine of $700 and imprisonment for a period not exceeding 12 months,” he said.
Government will also deploy the army onto the roads to help deal with traffic law offenders, according to Ncube.
Little relief has been offered to the public, with income tax threshold being increased from $300 to $350, while those earning above $20 000 will have to pay income tax of up to 45% down from 50% effective from January 1, 2019.
“In order to attract and retain skilled human capital and also cushion low-income taxpayers against rising prices of basic goods, the budget proposes to review the tax-free threshold from the current $300 to $350 and further widen the tax bands from $351 to $20 000, above which income is taxed at the highest marginal tax rate of 45%,” Ncube said.
The biggest chunk of the 2019 budget was allocated to the Primary and Secondary Education ministry ($1,132 billion), followed by Agriculture ($999,3 million), while Health was allocated $694 million when they bid for more than $1 billion.
Pharmacies will now be obliged to publish the maximum recommended retail prices agreed between manufacturers, wholesalers and retailers.
Ncube also allocated $310 million to kick-start the devolution process. As at end of August 2018, public debt stood at $17,69 billion and is likely to reach $18 billion by year-end.
“By end of 2018, it is estimated that the public debt statutory limit of 70% is likely to be breached. This underpins the urgency for containing our fiscal deficit,” he said.
Ncube proposed the privatisation of at least five public enterprises — namely TelOne, NetOne, Telecel, ZimPost and POSB and expects to raise $350 million from their sale.