Cosmetic policies will not work

Indeed, Treasury is faced with a fiscal cliff, as it has to balance between needs and wants. What a Herculean task that has to be completed in less than a month.
The Zimbabwean economy is dominated by a fragmented and underground market structure where opaque economic activities have been draining the economy since we dollarised in 2009.
In all instances and accounts, there has been a significant undervaluation of events on the ground with the external debt being the only macro-economic variable which is not tainted with errors in its determination.
With an official GDP of around US$5,8 billion and money supply of US$3,5 billion, it is a clear case that authorities are struggling to capture the grey economy, which seems to have a much bigger co-efficient.
The situation has also been worsened by the drying up of traditional sources that supported the Vote of Credit, who are reeling under the pressure of a sovereign debt crisis.
Most of the EU members require a more transparent and relevant mechanism in order to tackle the unsustainable debts which have compromised sustainable development of the First World economies.
These traditional sources of Vote of Credit have proved unreliable of late, with the past Budget statement having been a victim of this.
It is very untenable to expect a US$4 billion Budget when the VAT is dominating in the portfolio of sources of revenue.
This is a sign of a consumptive nation, which in GDP calculation is quite misleading as it doesn’t represent the geographical activities from the Zambezi to the Limpopo.
An informal economy is an indirect tax to the generality of the populace considering that it is comprised of free riders, who both avoid and evade paying taxes while at the same time enjoying the consumption of public goods.
Instead of continuously levying tax on the already restive section of the society which includes the civil servants who are already feeling the crunch of already depressed salary levels, the onus is upon Mr Biti to spread the net of taxation to the thriving yet illusive sector of the economy.
The irony of the indigenisation and economic empowerment is that most of the beneficiaries are still at sixes and sevens in committing to the fiscal requirements of the land.
A regime of accountability has to be imbued as the effort to widen the fiscal space is gathering momentum.
If one takes a stroll between Rotten Row and Julius Nyerere Way, it’s easy to notice that there are a lot of illegitimate and underground activities while in the same vein, competition for public goods continues to soar.
This implies that the Budget for infrastructural development will exert unusual pressure on the meagre resources.
On November 15, the Finance Minister will also be under pressure to make provision for harmonised elections next year and the chaotic constitution-making process.
This calls for a pragmatic Treasury boss who will not dare invest any iota of his time on cheap politicking knowing well that a voluminous policy document without substance in this era of austerity is uncalled for.
The downward revision of growth targets from 9,4 percent per annum to about 5,3 percent spells doom for a nation which has to revert to its own currency.
Unlike in the First World where a depressed economy is rebooted through an expansionary fiscal and monetary policy, the Government of Zimbabwe has no option except to watch the economic radar of Washington, London, Brussels and Pretoria.
Their domestic policies will impact on the prospects of Zimbabwe, by virtue of its economic ties through the existence of a multi-currency regime.
If the nation had opted for a pure dollarisation, negotiation could be in place to align economic developments in Harare with what the anchor currencies demand.
The almost extinction of the manufacturing sector has not been helping matters; this is one of the economic sectors which is quite easy to account for.
When it tends to become a walking textbook of pathology all the economic veins are bound to clog like the arteries of a centurion.
The path of announcing policy measures, which are off tangent to the grey economy will continue to make the economy a “cash till” of Mzansi.
The Ministry of Finance has to be well furnished with capacity utilisation levels currently obtaining knowing well that it is one of the major sources of revenues for the Government.
Thriving on exaggerated statistics can only make the whole task untenable as the announced Budget can only make effect in a world of fantasy and wishful thinking.
A common belief among the business community is to continue putting barriers which protect the local industry.
This may not be the right time, knowing well that production levels are at ebb and the opportunity cost of not taxing imported goods will lead to an economic loss which the nation cannot afford to bear.
However, this tax applies to consumer goods, whose relevance to everyday life is of limited use.
Most capital goods, which are dominating Zimbabwean shops, call for a levying of duty and failure to absorb on that will make the Budget a fixation of cosmetology by implication.
Cosmetic policies will not solve the problems of the ailing industry.

l Christopher Takunda Mugaga is an economist, and Head of Research of Econometer Global Capital, a regional finance and economics research firm. He can be contacted on [email protected]/ +263 77 234 0353,+263 77 626 6062.