HomePolitics2009 Budget: Govt Drops Populist Policies

2009 Budget: Govt Drops Populist Policies

ACTING Finance minister Patrick Chinamasa yesterday announced a US$1,9 billion pro-business Budget which seeks to liberalise many facets of the economy.

Chinamasa’s presentation, lasting nearly three hours and punctuated by heckling from MDC MPs, confirmed market speculation that government, after periods of dithering, would — as we reported last week — give a nod to the dollarisation of the economy.

Chinamasa also announced a raft of revenue-generation measures underpinned by enhanced collection of traditional taxes and duties which will now be paid largely in foreign currency.


The tax net has been widened to encompass the informal sector which has in the past escaped paying taxes and duties.


The Budget is a departure from the past when Zanu PF Finance ministers committed large resources to populist projects in farming, mining, small business enterprises and “income generating projects” — all designed to curry favours with the electorate.

“The 2009 budget thrust should therefore shift from policies that promote and fuel consumption to those which create wealth through supporting our productive sectors, particularly agriculture, mining, tourism, and manufacturing whose capacity utilisation is now below 30%,” said Chinamasa.

The government has made a commitment to liberalise the foreign exchange market to allow the use of multiple currencies. There is an admission that the stability of the volatile Zimbabwe dollar cannot come through “decree and legislation alone” but through interventions that avoid “money-printing beyond the economy’s production of goods and services”.

To this end, government will continue to pay civil servants in local currency and also give allowances in vouchers whose quantum is not known at the moment. These would however be “guided by foreign currency revenue flows”.

Chinamasa’s statement that include the central bank’s quasi-fiscal activities — largely blamed for fuelling inflation and creating distortions in the economy. Chinamasa also announced an end to price controls and Zinwa’s control over water reticulation and sewer systems in urban areas.

The gamut of policy pronouncements yesterday are clearly aimed at staving off the inflation tide which the central bank has failed to control over the last five years. In fact government now evidently blames Gono’s money-printing adventure for fuelling inflation.

“Excessive money supply growth emanating from unbudgeted expenditures made through the Reserve Bank as well as low supply of goods and services remain the major sources of inflation,” said Chinamasa.

The US$1,9 billion Budget will have to be financed from taxes and excise duties and not from printing money. To this end, there will be no more cheap loans for farmers and small businesses.

The loans which government has over the years been dishing out have failed to stimulate meaningful growth in production. Instead, farmers should be looking to industry and banks for funding of inputs.

Government will however continue to give limited support to small-scale farmers through input packs consisting of 10kg seed packs and 100 kg of fertiliser per farmer.

Industry has been given the green light to buy grain directly from farmers, ending the bonehead policy in which the GMB held a monopoly in grain purchases.

The honeymoon of under-priced goods is also over. Chinamasa said the National Incomes and Pricing Commission would no longer control the prices of goods and services and would instead monitor pricing systems in the region.

With it, the commission has also lost the mandate to control rates charged by councils and fees and levies charged by schools.

The government has also lowered customs duty on imported products to stimulate activity in commerce with a notable reduction in duty on motor vehicles, clothing and textile goods. –Staff Reporter


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