HomeOpinionBiti’s budget: The bouquets and brickbats

Biti’s budget: The bouquets and brickbats

AS Finance minister in Zimbabwe, it is hard to put a smile on everyone’s face.

Ask Tendai Biti, who last week presented his second national budget. Unions representing workers want more dole for their members and are quick to criticise, while Zanu PF wants more funds allocated to ministries headed by their officials and indigenisation groups want money to take over foreign-owned companies worth over US$500 000.
The state broadcaster, ZBC, attacked Biti’s budget’s statement left, right and centre. It has become a post-budget tradition.
Even after committing funds to key sectors such as agriculture, health and education, Biti still took flak from former ZBC news anchor and Affirmative Action Group president Supa Mandiwanzira for committing a “paltry” US$5 million for empowerment, which he described as an “insult”.
Then came the Zimbabwe Congress of Trade Unions president Lovermore Matombo, who said Biti’s adjustment of tax-free income thresholds would not benefit workers.
Economist David Mupamhadzi said Biti should create more fiscal space to ensure that other national priorities are catered for outside the budget.
He commended Biti for confining his budget largely in line with 2010 domestic revenue patterns and discounting vote of credit performance.
Mupamhadzi said: “Given the theme of the 2011 National budget of creating a fair economy, the allocations by the Minister of Finance were largely consistent with this. Furthermore in line with the pro-poor developmental thrust that the budget was focusing on more resources went to social and economic ministries.”
“Thus the budget allocations by the Minister of Finance were in tandem with the policy thrust that was outlined in the statement,” he said adding that: “The budget size for 2011 was largely consistent with the domestic revenue trend for 2010, and the Minister of Finance was also prudent to discount the performance of the Vote of Credit in the 2011 national budget, largely because funds for the Vote of Credit do not come directly to Treasury and also the inflows are not likely to be significant.”
Nathaniel Manheru, a Herald columnist believed to be President Robert Mugabe’s spokesperson George Charamba, attacked the budget claiming it was imperialistic and neo-colonial.
Other economic commentators said Biti handled his budget well, appeasing some of his critics and sticking to the theme of creating a fair economy.
The MDC-T naturally praised the budget as a product of wide consultation and a pro-poor budget.
It said: “The national budget, a brainchild of Biti and a result of extensive consultations countrywide, reflects a radical departure of previous national financial plans and projections in that it emphasises measurable growth targets, subjects itself to the needs of the poor, accepts and recognises the central role of civil servants and demonstrates the MDC’s solidarity with the peasantry.”
While the ZCTU expressed mixed views over the budget, analysts said a civil service salary increase of about 100% would improve disposable incomes and lift aggregate demand in the economy.
This, analysts said, would see retailers enjoying good business right through to suppliers.
“The substantial increase in government salaries — amounting to more than 100% — will without doubt increase aggregate demand in the economy because government currently employs the highest number of people in the economy,” said Tetrad. “The increased disposable incomes will be a major boost to retailers and indeed their suppliers. In addition, the wage increase in the public service is likely to spark wage increases in the private sector.”
However, Mupamhadzi said given the size of the budget (US$3,2 billion), and the “cash budget principle”  guiding the economy, more effort should be put in creating fiscal space to ensure that some of the key priorities are covered outside the budget. 
But Biti said his budget was conservative. He hoped more revenue would be realised to the tune of US$3,5 million.
“I see massive growth of this economy in 2011. I had planned for US$8 billion GDP by 2015, but we will achieve it next year. I have, however, discounted the other growth potential in mining next year. Bindura Nickel Corporation will reopen and we will have another Zimplats as more platinum mines will open,” said Biti.
Mupamhadzi said distortions on the calculation of the size of the Zimbabwe economy is one of the key challenges that the country was currently facing.
“Given the high level of informalisation of the economy, it is very difficult to capture all the activities in the country to determine an accurate GDP figure,” he said adding that:  “Zimstats should, however, assist the nation by coming up with more credible statistics after carrying out comprehensive industrial surveys. The revision of the GDP figure for 2009, from US$3,5 billion to US$5,6 billion clearly shows that a lot is missing in the calculation of the GDP.”
Analysts said the fiscal policy statement was generally positive as Treasury sought to consolidate the gains achieved since dollarisation.
Unlike in the past, analysts said, there was now a strong desire by government to curtail recurrent expenditure as evidenced by the calls for officials to limit international travel and the “containment of wage demands” by public servants, with government paying in line with revenue performance among other factors.
Tetrad said: “Strict adherence to cash budgeting is expected to strengthen a culture of fiscal prudence unlike in the past when money was spent wastefully with consequences such as ballooning government debt in a bid to cover the deficits as well as excessive printing of bills. That fiscal discipline underpins the economic stability — as evidenced by low levels of inflation — and the projections for strong economic growth.”

 

Chris Muronzi

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