FINANCE minister Patrick Chinamasa yesterday presented in parliament a paltry and virtually standstill US$4 billion 2016 budget, reflecting Zimbabwe’s mounting economic problems characterised by company closures and resultant revenue shrinkage. A projected deficit of US$150 million will be funded from borrowings on the domestic market.
Chinamasa’s 2015 fiscal year budget was US$4,1bn. He said the economy would grow by 2,7% in 2016, up from this year’s 1,5%.
His projections have been consistently wrong. Inflation is seen averaging -1,2% in 2016.
The new peanuts budget is smaller than those of all Zimbabwe’s neighbours, showing the impact of economic decline and how far back the country, which used to be an economic powerhouse only second to South Africa in the region, has regressed. With no currency of its own, the country no longer has even monetary sovereignty.
Budget expenditure for the period January to September 2015 amounted to US$3,297bn, including US$400,9m which went into the repayment of some of the country’s loan obligations. Although he announced civil service reforms, with anticipated annual savings of around US$170m a year, the minister steered clear of drastic austerity measures and radical reforms, including retrenchments.
Government wants to reduce the wage bill from above 80% of revenues to below 40%, but will spend US$3,685bn on recurrent expenditure and US$315m on capital expenditure.
Employment costs will gobble around US$3,191bn.
Chinamasa made a series of tax concessions to stimulate demand, encourage investment and save industry through protectionist measures and duties, but came up with no holistic stimulus package.
The minister exempted Vat on goods that include protective clothing, milk, eggs, vegetables, fruits, rice, cereals and margarine with effect from January 1 2016, and moved to protect the gold sector by lowering the royalty rate to 3% on incremental output of gold using the previous year’s production as a base year.