FINANCE minister Samuel Mumbengegwi yesterday presented a $7,8 quadrillion budget that analysts say is inflationary and populist in nature.
Mumbengegwi went on a money dolling spree in a move analysts say is designed to win hearts ahead of next year’s elections. Analysts said the budget was devoid of any policies that will solve the fundamental problems of foreign currency shortages, inflation and slumped production levels. Zimbabwe is currently facing serious food, power and fuel shortages. The exchange rate is still out of sync with the reality forcing individuals and companies to use the parallel market.
Analysts said Mumbengegwi’s budget is silent on how the government plans to solve all these problems which are at the core of the economic crisis.
For the second year running, the government failed to produce the blue book which gives specification allocations to government ministries.
The blue book shows government’s exact expenditures in the budget.
The budget which ran into quadrillions — a shocking figure is not often head of in world economics — clearly indicates the collapsed state of the economy as it clearly shows.
Last year’s actual budget was $27 trillion but it grew to $64 trillion after an additional $37 trillion which Mumbengegwi added through a supplementary budget presented in September. This new figure translates to an increase of 12 250% on last year’s budget which indicates that government is anticipating that inflation will continue to gallop next year.
Mumbengegwi said the budget would be funded from next year’s tax revenues projected to be about $6,080 quadrillion. He said the budget deficit will be 11% while the nominal Gross Domestic Product (GDP) was $16 quadrillion. Economists said government was likely to rely heavily on domestic borrowing and money printing.
Analysts are skeptical of the minister’s projections that inflation will come down from 14 840% to about 1 978% by end of next year saying there were no policies on the ground to achieve such an ambitious target. The market is also skeptical of his projection that the economy will grow by 4% next year on the back of increased agricultural production.
The economy has shrunk by more that 60% in real terms since the crisis started in eight years ago and analysts say any prospects of growth are nil unless there is a clear policy shift in government and outside help in the form of balance of payment support.
Ambitious projections on inflation and growth in previous budget statements have proven to be wide off the mark. Inflation had skyrocketed and the economy has registered negative growth for the past six years. “Its shocking empty in terms of real policies to drive the economy forward,” said an economist with a commercial bank. Mumbengegwi seemed to have a blank cheque as he presented what he dubbed the ‘People’s Budget’.
Mumbengegwi reviewed the tax free threshold from $4 million to $30 million per month and widened the tax bands to end at $500 million above which income would be taxed at 47,5% with effect from January 1, 2008. He also increased tax free bonus and performance related awards to $75 million. Non taxable threshold for retrenchment packages were also increased to $1 billion.
The budget will fund next year’s elections to the tune of $209 trillion. Line ministries were given $1,3 quadrillion. He gave $914,9 trillion to support the ministries responsible for health, education and social welfare.
He gave $302 trillion for next years’ cropping, irrigation and rehabilitation of equipment. This is despite the fact that the Reserve Bank of Zimbabwe (RBZ) has poured in trillions into the agricultural sector to fund the mechanisation and next year’s season. Mumbengegwi allocated $80 trillion for the rural electrification programme and a further $10 trillion to support rural communities take advantages of the electricity to venture into income generating project.
Troubled water authority, Zinwa, was given $48 trillion to repair its infrastructure. Two months ago the central bank gave Zinwa $14 trillion and US$5 million.
In what could be a pacifist move Mumbengegwi allocated $34,3 trillion for the housing of uniformed forces and $65 trillion for the general civil servant.
“I propose to allocate $25 trillion towards Operation Garikayi and $42,4 trillion for the Beitbridge redevelopment programme with priority towards completion of ongoing works.