THE Minister of Finance Samuel Mumbengegwi will present the 2008 National Budget next Thursday but the market is not expecting any surprises.
Analysts who spoke to businessdigest this week said Mumbengegwi was unlikely to come up with viable policies to revive the economy which has been in recession for the past seven years. Zimbabwe’s economy has shrunk by more than 50% since the crisis started in 2000. Shortages of basic commodities, power, fuel, water and foreign currency have persisted despite.
Mumbengegwi will present his budget at a time food shortages have worsened and inflation has galloped to an all time high of 14 840,6%. Service provision had collapsed on the back of deteriorating infrastructure like roads, schools and health facilities. Unemployment continues to grow.
“Given the state of the economy, the market should not expect any serious policy shift in the budget,” said an economist with a commercial bank. “It will just be a tabulation and allocation of huge figures that are not related to revenue growth,” he said. Mumbengegwi will also have problems in distributing the government revenue which has been shrinking for the past five years because of company closures and increased unemployment.
The government is also yet to recover from the losses it suffered during the price blitz. As at September 31 government has lost $20 trillion in potential revenue from income and Value Added Tax. Analysts say the loss could increase to about $65 trillion by the end of the year. Given the shrinking revenue base Mumbengegwi is likely to rely heavily on the borrowings from the local market and money printing in order to cover government’s costs. In September Mumbengegwi presented a $37,1 trillion supplementary budget which however failed to meet the request by ministries that wanted $255 trillion.
“There is no way inflation can be contained given that budgets are being financed through tax increases,” said Genesis Bank economist, Brains Muchemwa.
Economic consultant, John Robertson said the market expected the minister to address the supply side bottlenecks in order to improve the availability of commodities on the market. “The problem is that minister will not be able to deal with this problem decisively because of politics,” Robertson said.
Zimbabwe Congress of Trade Unions secretary-general Wellington Chibebe said workers should not raise their hopes because previous budgets have shown that the government is not interested in reducing the tax burden. “We want taxes to be linked to the poverty datum line according to the Incomes and Prices Stabilisation protocol which was signed by social partners,” Chibebe said.