HomeBusiness DigestNot much expected of budget - analysts

Not much expected of budget – analysts

Shakeman Mugari

THE much-awaited 2004National Budget is un-likely to make any fundamental changes to the country’s struggling economy, analysts said this week.

rial, Helvetica, sans-serif”>They say it is unlikely that government will devalue the dollar to match the flourishing parallel market. It will probably circumvent the thorny issue of interest and lending rates.

“We don’t see anything coming out of the budget,” said an analyst with Intermarket Asset Management.

“We might be having a few further taxes coming. The issue of interest rates will not be given much prominence while the foreign currency exchange rate is going to be slightly moved.

“Even the anticipated devaluation might only be up to about US$1: $2 000, which will not curtail the parallel market from which the bulk of the listed companies are getting their foreign currency.”

There is market speculation that government could pull out a shocker and increase the foreign currency retention ratio from 50:50 to around 70:30 in favour of the Reserve Bank of Zimbabwe (RBZ).

Their move is made urgent by the foreign currency crisis that has seen Zimbabwe’s fuel supply run dry during the last few months.

“Looking at how desperate the government is to lay its hands on the scarce foreign currency there is a possibility they will increase the retention rate in their favour,” one analyst said.

Government is reeling from a severe foreign currency shortage and analysts say it might take the budget as an opportunity to further arm-twist exporters to submit the much-needed greenback.

They say a hike in the interest rate is also unlikely, as it will worsen government’s soaring domestic debt, currently more than $595 billion.

“The issue of raising interest rates to match inflation levels is a non-starter because banks might collapse,” an analyst said. “Debtors especially in companies might not be able to pay.”

Analyst John Robertson said government would have nothing to share in the budget.”The tax base has been eroded by the economic downturn,” he said. “The government has also impaired its ability to borrow from financial institutes by paying them negative interests. The companies that used to lend money to government can no longer afford to because they are battling with the negative interest rates paid by government.”

He urged government to devalue the dollar to about US$1: $2 500.

“It will not make much difference but it will narrow the gap between the parallel and the official market,” he said

The budget, which was supposed to be tabled this week in parliament, has been moved to mid November.

Government has invited stakeholders to submit their budget proposals to the Ministry of Finance and Economic Development for consideration.

The Minister of Finance and Economic Development Herbert Murerwa, said the date of presentation was yet to be confirmed.

“We are still working on the budget and the proposals,” he said. “The budget is going to be sometime in November but the date is yet to be discussed.”

The minister said he was currently on leave.

Recent Posts

Stories you will enjoy

Recommended reading