‘Economy to grow 9pc’

Strategy Paper. “The positive growth is anticipated to average 6,7 percent for the period up to 2015.”
The concept of a Pre-Budget Strategy Paper, introduced last year, provides a platform for stakeholders to meaningfully contribute to the Budget formulation and consultations have since started. Minister Biti is expected to present the 2013 national Budget on November 15.
He said the higher growth projections would also be underpinned by a stable political environment and adherence to the cash budgeting principle as well as the continued use of multiple currencies.
But analysts believe the projections are “overly optimistic”.
“The 8,9 percent growth projection for next year, like the initial 9,6 percent growth for 2012, again is overly optimistic, especially in view of the current fiscal pressures.
“The current spending mix is unsustainable, with employment costs taking up a very large share of Government resources,” said an economist who preferred anonymity.
“What the authorities need to ensure in the outlook period is containment of wage bill growth which would create fiscal space to improve public services, raise infrastructure investment and build buffers,” he said.
This year, Minister Biti had initially projected a GDP growth of 9,4 percent, but was forced to cut the forecast to 5,6 percent due to subdued performance in key economic sectors.
Minister Biti also slashed the Budget from US$4 billion to US$3,6 billion citing poor revenue inflows.
Next year’s Budget is projected to be US$3,8 billion, about US$200 million higher than this year’s Budget.
“Guided by a 30 percent to Gross Domestic Product ratio, tax and non-tax, revenues in 2013 are projected at US$3,8 billion.
“Value Added Tax and Pay As You Earn are projected to lead, while some improvement in collections of non-tax revenue is expected. The expected growth in Value Added Tax should benefit from increased compliance in the use of fiscalised machines and the rolling out of the fiscalisation programme to the remaining sectors during the course of 2013,” he said.
Customs duty would be boosted by completion of the automation programme at the Zimbabwe Revenue Authority.
This should minimise interface between customs officials and the public and would go a long way in curbing corrupt tendencies.
Contribution from customs duty and the mineral sector would also be enhanced through intensified efforts to plug leakages at ports of entry and at the mines respectively. The prevailing low levels of capacity utilisation in the economy have had the effect of limiting the potential of companies to honour their tax obligations.
“In 2013 and beyond, it is imperative that we take steps to improve revenue collections, benefiting from improved transparency, accountability and good governance in the production, valuation and marketing of mineral resources,” said Minister Biti.
In line with cash budgeting and consistent with the Macroeconomic Framework, total expenditures in 2013 are projected to be around US$3,8 billion.
On account of the relatively large size of the State wage bill, the share of capital expenditure would be around 15 percent, translating to about US$550 million.
This would be lower than the target of 30 percent of total expenditure and the 2012 original Budget level of 20 percent.
The implied resource envelope balance available for Government operations and maintenance for 2013 would be around 17 percent or US$668 million.
To promote the flow of foreign direct investment, the 2013 Budget would seek to review some of the tax expenditures in order to harmonise and remove distortions in the tax system.