2015 budget set for Nov 27

via 2015 budget set for Nov 27 – DailyNews Live 17 November 2014 by Kudzai Chawafambira

HARARE – Finance minister Patrick Chinamasa says he will present the 2015 National Budget in the next fortnight.

While responding to a question pertaining to contradicting government projections on Zimbabwe’s mining sector growth, he said “wait for the budget, it’s only on 27 November.”

“What is most important is there is going to be growth in the mining sector next year because of the measures that we are taking,” he said at a Mines ministry press conference in Harare last Friday.

Mines minister Walter Chidakwa has projected the extractive sector to grow by six percent by year-end while Chinamasa has predicted a negative 1,9 percent.

This comes as the country’s 2015 National Budget funding is under threat as government continues to miss revenue targets, economists warn.

The country — whose forthcoming year’s budget is traditionally presented between November and December — is running on a cash budget after failing to secure external support, but tax income is dwindling on the back of waning economic activity.

According to tax collector Zimbabwe Revenue Authority (Zimra) latest statistics, net revenue collections in the third quarter to September 2014 amounted to $884,5 million, missing a $972,3 million target by nine percent.

Last year, Zimra collected a total $3,4 billion in tax receipts, six percent short of a $3,6 billion target.

As at August 31, 2014, government suffered a budget deficit of about $20 million, as revenue collections were 6,3 percent below target.

Tony Hawkins, a renowned economist, said “so far this year, revenue is down seven percent and will likely fall further in the final quarter”.

“The revenue target for the year has already been reduced by some 6,5 percent (in the September mini-budget), but with the slowdown in the economy one would expect a relatively small revenue shortfall from the downwardly-revised $3,85 billion target,” he said, adding that the higher taxes on fuel and new airtime tax “may close the gap somewhat”.

He said while a revenue-based budget was a real problem, the expenditure side is of concern following the $950 million increase in spending announced last month.

“It is hard to see how this can be accommodated purely by spending cuts,” he said.

Hawkins noted that global economic pressures — weakening commodity prices led by the steep fall in oil — also make the 2015 budget funding a tall order.

“Commodity prices as a whole are quite closely correlated with oil prices. There is just no fiscal space available and as a result I suspect there will have to be more spending cuts and further revenue measures,” he said.

He added that it is increasingly getting harder for government together with the private sector to borrow both offshore and locally.

“I would expect GDP growth to remain subdued at around the three percent level as forecast by the IMF and others, especially as there is unlikely to be a similar agricultural sector rebound as the one we are experiencing in 2014,” said Hawkins.

In April, Zimra commissioner-general Gershem Pasi told Parliament that despite surpassing the 2014 first quarter revenue target by two percent, the tax collector was likely to miss tax income targets for the year.

“We are headed for serious shrinkage of revenue unless something is done soon to increase revenue in the country,” the taxman said, adding that “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”.

Kipson Gundani, also an economist, noted that the shrinking revenue collections “present a challenge for the country” and is “dangerous because we do not have any financing mechanism.

“Close to 90 percent of our budget is relying on taxation apart from revenue inflows such as exports,” he said.

“We just have to spend what we have and live within our means,” he added.

In the quarter under review, Zimra says Pay As You Earn contributed $226,2 million against a target of $190 million as the tax agency stepped up audits and crackdown on defaulters.

Value added tax (VAT) on local sales collections amounted to $124 million against a target of $189 million as disposable incomes continued to fall while VAT on imports were lower at $126 million against the target of $132 million.

Customs duty collections were 25 percent below the $117 million target at $88 million and excise duty revenues fell by 10 percent to $123 million due to a decline in fuel imports.

The country’s trade deficit in the nine months to September stood at $2,84 billion.