By Bernard Mpofu
Finance Minister Mthuli Ncube last month presented a ZW$421.6 billion 2021 National Budget a few weeks before the country’s mid-term economic plan—the Transitional Stabilisation Programme (2018-20) came to an end. Ordinarily, after taking stock of the blueprint, Ncube would have gone back to the drawing board to ensure that he manages expectations for ensuing economic plans.
This makes the 2021 budget the first of five national budgets underpinning the National Development Strategy One (2021-2015)(NDS1) unveiled in Harare recently.
The budget like previous other fiscal policy interventions announced by the Finance minister has its positives and negatives. Although some of the policy interventions in the 2021 budget appear designed to provide flickers of hope and seem to have been crafted in the spirit of broad consultation, there are other aspects of the document which must be questioned without fear or favour and in the national interest.
We must, of course, be alive to the realisation that there is realistically no way in which an entire nation of 16 million people can always agree, in unison, on what the priorities are. People approach life from differing perspectives. However, what is important is to ensure that we are on the same page insofar as the priorities are concerned.
Interestingly one observed that the Treasury chief has continued waxing lyrical about what he sees as the major milestones of the TSP such as “fiscal surplus” and the stabilisation of the Zimbabwe dollar.
The successes however come against the backdrop of rundown public health delivery system, a resentful public service, more than half the population is facing starvation, and poverty is on the rise.
Amplifying the fiscal consolidation agenda, Treasury announced a planned budget deficit, at 1.3% of GDP, a figure significantly below the Sadc Macro-economic Convergence target of 3%.
The National Budget pledges zero recourse to borrow from the central bank to plug the projected budget hole. A budget is a commitment—it remains to be seen if the commitment to maintain fiscal discipline will materialise by resisting political pressure to breach fiscal limits.
The structure of the Budget is organised around NDS1 priority areas, a commendable departure from earlier budgets that were focused on allocating funds collected by the taxpayer to government departments and agencies. To a large extent, the 2021 budget clearly indicates the activities being funded and how much is being allocated towards those resources.
To ensure that allocated funds are used for the purpose indicated, responsible government departments and agencies will be required to draft strategic plans to be implemented via the Integrated Results-Based Management framework, supported by secretary performance contracts.
One of the major issues that made this budget a subject of immense criticism is that it somehow lacks a human face. When it suits them, the authorities do not hesitate to levy taxes in US dollars but when it comes to expenditure, the Zimbabwean dollar conveniently kicks in. Currency deception is unsustainable, as history has played out.
It has also not gone unnoticed that the government is increasing the tax burden on poverty-stricken citizens — even to the extent of squeezing street vendors and hairdressers — yet taxpayers are not getting anything useful in return by way of improved service delivery, better infrastructure or governance reform. A budget must have a human face. Ablution facilities at placed where most people in the informal sector eke out a living leaves a lot to be desired.
Ncube said while the economy will contract by -4.1% by year-end, it will rebound with a growth of 7.4% before stabilising at an annual growth rate of 5% thereafter.
A national budget is the single most important policy instrument of any government. For that reason and more, a budget has to be inclusive, well-thought-out and grounded in reality.
The priorities in the 2021 Budget seem fairly easy to define. Whether the policymakers and bureaucrats share this view is a story for another day. Healthcare, education, infrastructure, agriculture, mining and tourism, for instance, should surely be considered among the most important areas.
A government exists primarily to safeguard the wellbeing of citizens. This wellbeing is multi-faceted: physical security, food security, social service delivery, economic stability, provision of equal opportunity, and so forth. Without these crucial ingredients, it becomes difficult, if not impossible, to propel forward the socio-economic development agenda.
Economists often have the luxury of deploying high-sounding words, models and concepts to dazzle the masses. Theirs, after all, is not an exact science; it is a field of knowledge focused on human behaviour, which is notoriously unpredictable. What the toiling Zimbabweans need are not fancy philosophical postulations couched in economic sophistry, but practical solutions to livelihoods that have been decimated by a ruinous combination of economic mismanagement, corruption and Covid-19.
This budget lacks a human face; it projects a lack of empathy. When it suits them, the authorities do not hesitate to levy taxes in US dollars but when it comes to expenditure, the Zimbabwean dollar conveniently kicks in. Currency deception is unsustainable, as history has repeatedly shown.
It has also not gone unnoticed that the government is increasing the tax burden on poverty-stricken citizens — even to the extent of mugging street vendors and hairdressers — yet taxpayers are not getting anything useful in return by way of improved service delivery, better infrastructure or governance reform. A budget must have a human face.
To finance the budget, treasury wants everyone’s belt to be tightened. This includes milking those of you running small stalls at places such as the Gulf Complex in downtown Harare. Street hustlers, such as those selling tech gadgets and mobile phones, will now be charged tax equivalent to US$30 per month per unit. A restaurant or liquor centre, which is smarting from months of closure due to Covid-19 is now required to pay $10 000 per month in taxes.
With no budgetary support due to a huge external debt, Treasury has been relying on domestic resources to finance capital projects. This, however, has resulted in limited funding for social spending, thereby exposing vulnerable groups to the harsh economic environment.
What can be done?
The budget does not adequately put resources into the key social sectors necessary or sufficient to get debt on poverty Zimbabwe failing to meet regional benchmarks-such as the Abuja Declaration–in terms of social spending, health, education, water and sanitation. We are relying too much on donor support and this is not sustainable.
The onus is on Ncube to strengthen relations with development partners and the donor community to ensure that the country’s health sector can be resuscitated.
Lastly, the gross capital formation for 2021, at 9.45% of GDP, indicates that we have very low ambition. It is a big indictment on us a nation that more than 70% of this gross capital formation is coming from the government. This suggests the private sector is not coming to the party in terms of investment in capital goods. Improving the ease of doing business and incentivising new start-ups is one of promoting entrepreneurship and inward investment.Post published in: Business