IN a major climbdown, Finance minister Herbert Murerwa yesterday said government will privatise seven parastatals in a bid to staunch hemorrhaging of the fiscus.
Over the past four years, the government has been reluctant to wean off non-performing parastatals, arguing either that they are “strategic” or the state would not get the best value because of high inflation.
In his record $123,9 trillion budget delivered to parliament yesterday, Murerwa said the nation was now deeply divided between the rich and poor.
Last year’s budget provided for total expenditure and lending of $27,5 trillion and revenue of $23 trillion.
This implied a budget deficit of $4,5 trillion or 5% of GDP.
The supplementary budget raised the 2005 total expenditure and net lending to $31 trillion.
The bid to privatise parastatals comes in the wake of crippling indebtedness by the state, a bloated budget deficit and continued decline of all economic fundamentals.
“Parastatals and local authorities have remained a major impediment to economic growth and a drain on the fiscus, with some of the turnaround strategies being implemented inadequate to provide the desired results,” said Murerwa.
“Government has, therefore, decided on the restructuring of some of the public enterprises through strategic alliances and joint ventures that facilitate the injection of additional equity capital, as well as access to modern technology and equipment,” he said.
Organisations earmarked for privatisation are the Zimbabwe Power Company, Tel*One, and Net*One who will now look for a strategic partner.
The Zimbabwe Iron and Steel Company should operate under a management contract, the National Railways of Zimbabwe is expected to be put under concession whilst Air Zimbabwe is set to operate under a strategic alliance.
The Cold Storage Company is set to go under a partial divestiture pending listing on the local bourse.
The budget, titled “Fostering Macro-Economic Stability for Sustainable Development”, forecast total revenue for 2006 of $110 trillion, whilst expenditure is expected to be $123,9 trillion. The budget deficit will remain high at $13,9 trillion, which translates to 4,6% of gross domestic product.
Murerwa said to raise resources, especially hard currency, and to ensure wider indigenous participation in the economy, government will also divest some of its shareholding in other companies.
Murerwa availed $7,4 trillion to the Ministry of Education, whilst the Ministry of Health was allocated $5,2 trillion, and Defence $4,3 trillion.
Higher and Tertiary Education got $3,9 trillion.
He set aside $5,5 trillion as government’s contribution to civil servants’ medical insurance while the Zimbabwe Revenue Authority was given $4 trillion for its operations.
The agricultural sector was given $31,4 billion for extension services and another $116 billion for procurement of vaccines, dipping chemicals and tsetse fly eradication.
Murerwa did not make a provision for the reintroduced senate.
Capital expenditure was allocated $30 trillion.
However, Ministry of Finance officials said the funds will be accommodated in the Revenue and Expenditure book – commonly referred to as the blue book.
Murerwa raised concerns over lack of fiscal restraint, but said financial disbursements will now be strictly based to revenue inflows.
As of January next year, Carbon Tax will be collected at the point of fuel importation at a rate of $1 000 a litre, whilst fuel products will now be aligned at the ruling inter-bank market rate.
The tax-free threshold was revised from $1,5 million a month to $7 million a month.
Murerwa also proposed to widen the tax band to end at $40 million a month, above which income is taxed at 35%.
The tax-free bonus portion was hiked from $5 million to $20 million as of November 1.
It was not good news though for importers of shoes, clothing, travel bags and beverages that are denominated in foreign currency as they will be levied at the inter-bank rate with effect from Thursday next week.
Murerwa reviewed the duty structure of fortified wines, sparkling wines and spirits from 15% to 10%, 20% to 10%, and 10% to 15% respectively with effect from today.
Next year, the economy is expected to grow in real terms by between 2% and 3,5% mainly driven by agriculture, manufacturing, mining and tourism, Murerwa said. This is at variance with IMF forecasts which envisage a contraction by 7%.
He also proposed that the 2006 civil service wage bill would not exceed $30 trillion.