Biti’s Budget crunch

US$200 million in forecast additional revenue means that he has little room to manoeuvre.
Fiscal authorities slashed the 2012 National Budget from the original US$4 billion to US$3,6 billion due to poor revenue performance and see the revenue inflows at US$3,8 billion next year.
Minister Biti projected revenue inflows in his pre-Budget paper, which forms the basis upon which the fiscal statement will be crafted.
But the almost static projected revenue inflows come against the backdrop of massive obligations, considering civil servants’ demands for a pay hike and growing needs in health and education.
“A major highlight of the pre-Budget Strategy Paper is the macroeconomic parameters for the period 2013–2015, including resultant projections over the potential available resource envelope.
“The pre-Budget Strategy Paper is to  be unveiled as a prelude to the 2013 Budget consultative process,” said Minister Biti.
The strategy paper recognises the importance of pre-Budget consultations so that fiscal authorities have insight into critical issues affecting the nation, to be able to direct limited resources to priority areas.
But the national purse remains bloated with critical funding requirements that disrupted several State programmes after fiscal authorities failed to avail resources due revenue underperformance.
The script is unlikely to change next year and, while priority naturally remains on education, health, social protection of orphans and vulnerable children, the biggest challenge comes from the civil servants’ demands.
Against the backdrop of limited resources, low industrial capacity, high cost of funding, low exports, energy crisis, high cost of utilities, and poor infrastructure, Minister Biti will also have to find the correct matrix to spur economic growth at the 8,9 percent he forecast for next year. Economic growth was revised downwards from 9,4 percent to 5,6 percent on the back of agriculture’s poor performance.
And economic analysts contend that there is going to be little change or surprise in a Budget where civil servants’ salaries, excluding other recurrent costs, gobble more than 70 percent of revenue.
“The minister is right on his estimates on the expected revenue projections. Obviously as a nation we do not expect much deviation from the current year Budget in terms of budget revenue generation because of the stagnation within the economy which is a result of liquidity challenges.
“The current state of affairs in the economy requires the Minister of Finance to abandon his motto ‘We eat what we kill’. It is not working! He is a father who is killing mice for the whole family and he is obviously failing to feed them,” said South Africa-based economist Mr Gift Mugano.
He added that it was high time the Minister of Finance looked aggressively for funding from friendly countries like China and use minerals as collateral to boost Government’s coffers.
Alternatively, he said, the minister has to embrace the indigenisation drive which will see the establishment of sovereign wealth funds which will address the liquidity challenges the country is facing.
“It is the best practice internationally. Arab countries in the Middle East, for example, the United Arab Emirates, have sovereign wealth funds of over US$500 billion which came from their oil,” said Mr Mugano.
Another economist, Mr Brains Muchemwa, said that to expand the revenue base, fiscal authorities could use the fiscal policy as a tool to allocate resources when the market mechanism fails to do so and considering that the financial markets’ priorities are not in sync with the policymakers, the temptation at Government policy level to set up various funds to intervene directly was high.
“Save for the agricultural sector, most of the industries that are under severe stress such as large-scale manufacturing are beyond redemption and the fiscal authorities, for lack of such funds, should not entertain calls to avail State resources towards distressed companies.
“Doing so would be a lost fiscal cause that will only but increase the quasi-fiscal losses and most beneficiaries of such funding are most likely to refinance their existing liabilities and still remain stuck as before,” he said.