Mixed reactions to fiscal statement

and economists.
Legislators welcomed Minister Biti’s move to protect local industry from imports.
Zanu-PF representative for Goromonzi North Cde Paddy Zhanda said the review statement had touched on core issues that required Government intervention.

“In all fairness, the minister has tried his best, particularly on the need to protect local manufacturers and the US$40 million revolving fund for the manufacturing sector.
“It is important that he has realised that we need to give space and time to our local industry that will create employment which will go a long way in addressing challenges that have been facing our country.

“The minister’s realisation of the need to protect the local industry is applauded,” he said.
Cde Zhanda who is also the Parliamentary Portfolio Committee chairperson for Budget, Finance, Economic Planning and Investment Promotion said Minister Biti adopted some of the recommendations his committee suggested.

He, however, said it was not advisable for Minister Biti to provide money for big capital projects, saying Government should leave such projects to private sector partnerships.

“I don’t agree with him (Minister Biti) on trying to finance such big projects like Tokwe-Mukorsi Dam, Joshua Mqabuko Nkomo International Airport. Those major infrastructural development projects should be left to private players because our budget cannot sustain that. The US$6 million for demonitisation is also not sufficient. I would have hoped that US$12 million to around US$15 million would have been better,” Cde Zhanda said.

Uzumba MP Cde Simbaneuta Mudarikwa (Zanu-PF) said the review had failed to address fundamentals facing Zimbabwe.
“At the moment there is no incentive for one to deposit money with the bank because when I deposit money I get less than 1 percent interest, yet when I borrow money from the bank they charge interest as high as 15 percent.

“He (Minister Biti) was saying tourists use plastic money and that affects cash inflows. He should know that if you can’t beat them you have to join them. He is supposed to encourage use of plastic money because we cannot have an economy being managed by money in pockets and breasts,” he said.

Cde Mudarikwa commended Minister Biti for introducing duty on some agricultural products adding that it would have been proper for the review to remove duty on agricultural inputs.
“He has failed to address critical issues especially on duty where he put it on some imports yet did not remove it on inputs which farmers bring in here.

“For instance if one goes to Mbare there are tomatoes coming from South Africa duty free yet if a farmer wants to import farming inputs we are charged duty.
“We would have wanted him to remove duty on agricultural inputs and mining equipment since those are the sectors which make the economy survive.

“We cannot have a situation where the diesel I use to go and see my girlfriend is bought at the same price with the diesel that a farmer or miner uses to produce for the country,” Cde Mudarikwa said.
He also said the review had failed to provide incentives for grain farmers to sell to the Grain Marketing Board.
“He said they are going to look for the money to pay farmers who bring maize to the GMB which means there is no immediate payment to the farmer which makes it difficult for them to prepare for the next farming season,” he said.

MDC-T representative for Bulawayo East, Ms Thabitha Khumalo said Government was supposed to cut on foreign trips, which Minister Biti said had so far chewed over US$30 million.
“The issue of foreign trips is eating much of our revenue and it is important that these are cut.
“There is also need for us to address the issue of civil servants salaries because we cannot have an economy where salaries eat more than 50 percent of our budget.”

Mkoba legislator, Mr Amos Chibaya (MDC-T) said the review had touched on industry resuscitation, which would see the economy performing better.
“It is important that Minister Biti talked of the need to resuscitate industries like Shabani Mashava Mines and the textile sector.
“Our clothing industry is almost dead, there is therefore need to resuscitate these companies which will create employment and revenue to the Treasury through Pay As You Earn,” he said.

MDC MP for Insiza, Mr Siyabonga Ncube hailed the reintroduction of duty on some imports.
“The Minister should have told us how much foreign trips have brought into the country compared to what we have spent on those trips. However, the executive should cut on those trips.

“There is also need to address the issue of diamond money from Chiadzwa because now it appears as if we have two Treasuries and to implement the civil service audit where a lot of people are being paid for not doing anything.

“The review was good though it still needs some panel beating, here and there,” Mr Ncube said.
Economists criticised the mid-term budget statement saying it was largely based on “aspiration” and leaves little room for recurrent and capital expenditure.
They contended that financing constraints will hinder most of the macro-economic targets indicated in the statement.

Economist Mr Witness Chinyama said three major factors were critical for the implementation of budget targets, namely financing, political will and the establishment of effective economic tools.
“In a nutshell, the major problem with this mid-term budget is that of funding. Worse still we are talking about a budget deficit in a United States dollar environment, which is very dangerous.

“Dollarisation has meant that we have limited control over the fiscus, that is why the Minister has had to do gymnastics to balance the budget,” he said.
Mr Chinyama added that it was critical for Government to now leverage on local resources to finance the budgetary requirements.
“The issue of transparency on diamonds then takes more of a centre stage, and it is also necessary that we stick to cash budgeting.

“The Government relies entirely on tax revenues, aid inflows, foreign borrowing and any asset sales for revenues. Monetary policy is largely immobile because money supply is determined through the balance of payments, while interest rates are set by supply and demand. These constraints place the burden of Government action on fiscal and structural policies,” he said.

Under the multi-currency regime the Reserve Bank of Zimbabwe cannot monetise fiscal deficits, which has forced the authorities to adopt cash budgeting.
Another major area of concern with the mid-term budget is that the civil service wage bill continues to stake a significant portion of the budget, constraining capital expenditure on key economic enablers.

Another economist Mr Takunda Mugaga lamented the lack of determinacy in the budget.
“It’s a budget, which is more of an indicator reflecting present crises and areas of shortfall. We are already in a shortfall and employment costs continue to be an anathema to the 9, 3 percent economic growth target as indicated by Minister Biti.

“It is also short on policy action, especially considering that the Medium Term Plan is about to take over from STERP II.
“There is also glaring inconsistency in some areas, for instance, the issue of interest rates. The Minister has indicated a downward revision of interest rates but this is impossible with an insolvent central bank, as banks are forced to cushion themselves from the perceived sovereign risk by hiking rates,” said Mr Mugaga.

The country’s monetary policy is severely limited by a lack of market liquidity, low savings, volatile deposits and limited availability of credit, the reduced role of the central bank as a lender of last resort and the introduction of the multi-currency system.

Mr Mugaga, however, noted some positives in the statement including the US$50 million allocation to Small-to Medium Enterprises development and the re-introduction of duty on imports such as cooking oil and processed foods among others, which could be translated as somewhat of a protectionist measure for the local productive sectors.
Analyst Mr Ronald Makiwa said it was necessary for the Government to add impetus to the restructuring of State enterprises and parastatals to enlarge fiscal space by streamlining the civil service.