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poor revenue inflows, particularly from diamonds. He had projected to collect US$600 million from the gems.
In the five months to May this year, the Zimbabwe Revenue Authority missed revenue targets by US$194 million. This means the minister will this afternoon submit amended estimates of expenditure and a consequential Appropriation Amendment Bill.
“The Government has noted a disappointing contribution from the diamond sector,” economic analyst Mr Brains Muchemwa said last week.
“Little can be done to improve revenue collection, especially considering that the minister has already hiked mining sector royalties. Considering that our
Government expenditure is skewed towards recurrent expenditure, the minister has very few options to stimulate growth.”
Initial Gross Domestic Product was projected at 9,4 percent this year. But analysts said due to the poor performance of the agricultural sector, and the liquidity crunch adversely affecting economic sectors such as manufacturing and finance, the growth targets would be missed. The GDP growth would be in the range of between 5,5
percent and 6 percent, according to economists surveyed by Herald Business recently.
Economists said the envisaged growth rate was not possible, without an active private sector and lively foreign direct investment. For instance, Government funded capital development projects remain largely unimplemented as compared with those managed by the Infrastructure Development Bank of Zimbabwe, which had shown higher capacity utilisation levels.
“The outlook is, however, not totally bleak, as inflation has remained relatively stable,” said a local economic research firm.
“Sector specific indicators are also encouraging, with the gold mining sector particularly doing well, supported by the positive bullion global price trend. The retail sector, despite low wages, also continues to witness some growth.
“Solution to the liquidity crunch lies in a ‘grand bargain’ that raises corporate taxes, preferably through base broadening reform, and curbs the growth of entitlements such as public spending on political events such as elections, constitution and endless bailout of the rundown parastatals, whose expenditure bill accounts for 45 percent of the total GDP.”
The minister is also expected to maintain the customs duty policy. In the last Budget, Minister Biti re-introduced duty on commodities such as cooking oil, maize meal, flour, rice and salt to support the domestic industry.
In terms of recurrent expenditures, the wage bill for civil servants remains unsustainable. But economists say there is room for a salary review. Several capital projects would remain underfunded, which will have a negative impact on utility performances in power generation, transport and water.
With agriculture remaining the mainstay of the economy, Minister Biti is expected to unveil an Agriculture Financing Facility that has the potential to unlock additional funding arrangements by the private sector. Farmers need to start preparations for the 2012/13 agricultural season. Economists have also noted serious delays in the management of tax systems, which had compelled most business players to avoid or evade paying tax.
“In this Mid-Term Budget Statement, we expect the Treasury to introduce the complete automation of tax services. This will lead to fast clearance of goods and reduce interface between taxpayers and the tax administrators,” Harare-based economist Mr Takunda Mugaga said.
On the mining sector, analysts said royalties should be raised to an average of 12 percent from the current 7 percent for gold and to 15 percent for platinum from 10 percent. But some economists have argued that raising royalties to such levels would discourage future investments into the sector, which has been driving the economy.
Online Reporter