Zimbabwe’s revenue collection tumbles, Treasury

via Revenue collection tumbles, Treasury 14/05/2014 NewZimbabwe

REVENUE collection continues to tumble and there is need to urgently introduce a cocktail of measures to address the problem which is adversely impacting economic growth, a government official has said.

Principal Director in the Finance Ministry, Pfungwa Kunaka said Monday that during the first quarter of 2014 the economy has shown signs of slowing down, signifying inherent challenges.

He said notable indicators reflective of the slowdown included a decline in revenue collections during the first quarter which underperformed by 3.9% compared to the corresponding period in 2013.

“Value Added Tax collection, which indicates the level of aggregate demand in the economy, declined by 15.1% during the first quarter of 2014 compared to 2013,”said Kunaka during an economic forum organised by captains of industry in Mutare.

The treasury official said severe liquidity constraints in the financial sector which have seen domestic credit growth of only 8.6% between February 2013 and February 2014 compared to about 34% in 2012/13 and 50% in 2011/12 have also impacted negatively on the economy.

Kunaka said credit risk remained a key challenge as evidenced by the Non-performing loans (NPL) ratio which increased to 16.63%as at 31 March 2014, up from 15.92% as at 31 December 2013.

“This trend is partly a reflection of macroeconomic challenges that have militated against borrowers’ ability to service loans,” he said.

Declining productivity and competitiveness was also a major challenge for the economy.

“The productive sector continues to face decreasing demand due to tight liquidity in the economy, lack of affordable long term funding, unreliable supply of utilities such as power and water and influx of cheap imports owing to the appreciation of the real effective exchange rate,” said Kunaka.

He added that although the 2014 national budget increased some tariffs on a number of imports with a view to levelling the playing field, the benefit is not being fully exploited due to the prevalence of other perennial challenges.

“The dire state of the manufacturing sector is also being reflected through the increasing trend of company closures and the scaling down of operations,” he said.

According to 2013 NSSA report, more than 2,893 companies, of which the manufacturing sector accounted for the majority, closed by the end of December. This affected 55,000 employees had to be retrenched.

Pfungwa also said information from the Master of the High Court indicated that 9 companies were put under final liquidation in one day in the month of February 2014.

“Sectors affected include; textiles and clothing, construction, paper and printing. The above development requires urgent measures in support to revive the sector,” he said.

Of concern, Pfungwa said, was a decline in essential imports such as raw materials, equipment and machinery which are critical to supporting production.

“Month-on-month performance of high frequency indicators reflects evidence of economic slowdown during the first quarter of 2014.

“Government and, in particular, the Ministry of Finance and Economic Development is currently ceased with these challenges with a view to providing a solution so as to keep the implementation of Zim-Asset on track,” said Pfungwa.

He also suggested that it was critical for the country to establish a track record of loan repayments to China and other emerging markets in order keep these sources of funding flowing.

In addition, Zimbabwe could also benefit from its large population living in the diaspora.

“In 2013, it is estimated that a total of US$1.8 billion was received as remittances in the country. Diaspora remittances have grown to become an important source of funds that can be leveraged for national development,” he said.

Treasury was also working with financial institutions over the issuance of diaspora bonds, he added.

Currently CBZ Bank is working on modalities of a $200 million diaspora bond which will be guaranteed by Afreximbank, according to Pfungwa.

 

COMMENTS

WORDPRESS: 16
  • comment-avatar
    matombo chiremba 8 years ago

    We cannot want diaspora money yet continue to marginalize these Zimbos by denying them the basic right to vote, which even the lowly Mozambique extends to its dispora!!!!

    • comment-avatar
      Ruramai 8 years ago

      Matombo, if Mozambique is “lowly”, how would you describe Zimbabwe a country where people still die from medieval diseases such as cholera and typhoid?

      Why are some people fond of denigrating other countries? Why not just say Zimbabwe should emulate other countries who allow the diaspora to vote? Shame on you Matombo.

  • comment-avatar
    John Thomas 8 years ago

    Good. These guy need to feel the pressure. They are killing us all.

  • comment-avatar
    David Mutambirwa 8 years ago

    A holistic approach is the only way to go in order to come out of the economic comatose state we have as zimbabweas.

  • comment-avatar

    These declines in the economy are because there is no money, nothing to spend. So manufacturers and retailers are closing down and employees are becoming unemployed.
    Why is there no money? Because President Hapana Basa, aged 90, is spending it all paying Cuthbert Dube $350,000 per month, and the Harare Town Clerk, City Treasurer etc. $40,000 per month and we can only imagine how much to army generals and cabinet ministers. Never mind the lowly $4000- dollars he pays himself; perks not included. Of course President Hapana Basa will say that he is not the one, and will blame someone else.
    This kind of looting has to stop immediately. The economy is in a state of collapse.

  • comment-avatar

    THEY DONT CARE ANYMORE ,THEY CANT AFFORD TO DO THE HONEST THING.EVERYONE KNOWS WHAT HAS TO BE DONE FOR THE ECONOMY TO COME RIGHT IT IS SIMPLE COMMERCE AND ECONOMICS THE WORLD OVER.THIER GOOSE IS OVER COOKED NOW!

  • comment-avatar

    Zimbabweans do NOT pay tax, take all your money from the bank and stop paying anything to government. Within months they will collapse, the police and military without pay will in a very short space of time shoot these ministers and generals that have looted the country.

    • comment-avatar
      Petal 8 years ago

      HEAR HEAR HEAR Jrr56! WELL SAID

    • comment-avatar
      Gomogranny 8 years ago

      Have enjoyed doing this for some years now Jrr56….patiently waiting for others to have the balls to do the same! Thank you nice to know it is not a completely lonely battle…

    • comment-avatar
      MikeH 8 years ago

      Absolutely spot on.

  • comment-avatar

    As they get more desperate taxes will go up, wait a short while and vat will rise and rise as they look for more ways to get cash

  • comment-avatar
    Don Cox 8 years ago

    When they can’t pay the police and the army, there will be direct raids on people’s houses.

    Before that, expect measures such as confiscation of half of all bank deposits.

  • comment-avatar
    Rwendo 8 years ago

    Well spoken Jrr56. These are the type of strategies it would take for an effective opposition.

    People were against stay-aways to ‘save’ their jobs. Well, that worked, for a little while. But the elephant has remained in the room. And we are slowly coming full circle.

    Even the abandoned demonstrations are resurfacing, and for now they are not even organised by politicians.

  • comment-avatar
    munzwa 8 years ago

    jrr56, spot on, crash the system so no vat payments, they will only learn when their own pockets are hurting…

  • comment-avatar
    Saddened 8 years ago

    “Government and, in particular, the Ministry of Finance and Economic Development is currently ceased with these challenges with a view to providing a solution”
    Interestingly the word ‘ceased’ is used instead of ‘seized’ But this is correct because the government has ceased to do anything to fix the economy.