Murerwa faces no-win situation over budget

Godfrey Marawanyika

LESS than 40 days ahead of Christmas, it might be too early to scribble a festive season wish-list until Finance minister Herbert Murerwa presents his budget on December 1.
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Murerwa will have to do a balancing act of trying to please both the government and the people who are already poverty-stricken because of rising inflation.


An increase in the budget means that working people will have to pay more in taxes to sustain government’s spendthrift ways.


If he widens the tax bands, as many people would want him to, the government will have less to spend and could borrow heavily.


Analysts say Murerwa would be in a Catch-22 situation of trying to feed too many mouths from a very small cake which the government has already pillaged through massive domestic debt to fund last year’s shortfall.


Murerwa would also need to deliver a budget that relates to the monetary policy presented last month. But analysts warn that the budget is likely to contain the same old piece-meal measures that are not enough to achieve growth.


The budget was supposed to be presented on the traditional last Thursday of this month, but this has now been moved to the first week of next month.


For the 2005 financial year, Murerwa presented a $27,5 trillion budget, an increase of 215% from the previous year. There are, however, fears that next year’s budget could grow by more that 300% because government has not done anything to cut its bloated wage bill which has been taking a significant chunk of the previous budgets.

Government’s revenue streams are however drying up as more people are retrenched with companies closing. This year, total revenues are expected to be $23 trillion, resulting in a $4,5 trillion budget deficit.


Three-quarter way through the year, Murerwa presented a $3,4 trillion supplementary budget in August, which he blamed on drought.


One of the major problems which the government has failed to do is to assist the productive sectors.


Over the years, recurrent expenditure has been more than capital allocations which exerts pressure on inflation. In any properly run country, recurrent expenditure should be covered by recurrent revenue, which will result in the state generating its own income rather than resorting to getting money from the central bank.


Some of the projections made by the Finance minister in November last year such as a rise in gross domestic product have collapsed. So has the promised rise in agricultural production.


Murerwa had hoped that by year-end, inflation would be between 30-50% but it is now 411%.


The government had also hoped for the restoration of positive real growth rates targeted at 3-5% but this was not to be, as this has now been revised to 2%.


During the budget presentation, the government had undertaken to support agricultural land utilisation so as to guarantee food security and a surplus for export, but 11 months down the line very little progress has been made to revive the agriculture sector.


While Reserve Bank governor Gideon Gono and Vice President Joseph Msika speak out against invasions, State Security minister Didymus Mutasa is threatening to evict more commercial farmers.


Analysts said the government will also need to create a conducive operating environment to arrest de-industrialisation through the protection of local companies from subsidised cheap imports.


Although the country managed to offset its International Monetary Fund arrears by US$135 million, there is still need for the government to support foreign exchange generation and move towards market-determined policies.


The government will also have to take bold measures to build confidence in the economy with a view of promoting savings and investments.