ZIMBABWEANS should expect a tough 2016 as the budget presented by Finance minister Patrick Chinamasa does not offer an economic stimulus to ensure recovery and sustainable growth, analysts have warned.
Taurai Mangudhla/Fidelity Mhlanga
Zimbabwe Economic Society president Lovemore Kadenge said the US$4 billion budget presented by Chinamasa was reflective of a standstill economy. Last year Chinamasa presented a US$4,1 billion before it was revised downwards to US$4 billion.
“It seems there is no change, but people expected a raft measures to stimulate the economy. It’s also clear there are no reforms to talk about,” Kadenge said. “In short 2016 will even be tougher than 2015.”
Former Economic planning minister Tapiwa Mashakada also said the budget was static, confirming economic stagnation. “The budget lacks a stimulus package, agriculture alone will require US$1,7 billion. The banking sector does not have the capacity to fund agriculture to that tune. The looming drought as a result of the El Nino will cripple growth,” said Mashakada. “The budget is also pie in the sky since it allocates revenues not yet collected in such an environment.”
However Reserve Bank of Zimbabwe (RBZ) governor John Mangudya welcomed Chinamasa’s initiative, describing it as a “pro-developmental budget”.
“This is a pro-poor budget in that, for example, if we put resources in Marange and say let’s produce diamonds in Marange so that we can export and have money in the country. Also removing Vat means more capital is coming in the country. Removal of rebate on Vat will propel business to go forward,” Mangudya said. “We are reducing the cost of doing business; we are minimising sovereign risk so that local and foreign investors will find it easy to invest in the country.”
He hailed Chinamasa’s commitment towards clearing the country’s arrears, saying this could unlock fresh funding.
“This economy is starved of capital formation and once we clear arrears we are going to have more resources on the ground and new business,” he said. “The US$1,8 billion owed to creditors is not a budgetary issue. We are putting in financial structures to ensure that we repay the money. We will use our resources to pay the US$110 million owed to IMF. The other one, we owe African Development Bank that we are going to use bridging finance from that we will put in place and progress has been done.
“We are getting the bridging finance from international financial institutions. The balance we are going to be contacting a loan from bilateral resources. That is doable and we are on course.”
Former Finance minister and current Parliament portfolio committee on finance and economic development chairperson David Chapfika said Chinamasa’s budget was largely progressive although it failed to address industry concerns.
“It was progressive by and large, but I think what surprised me is suspension of duty on the importation of flour. I don’t know the rationale for that because the view of the committee was that we should import wheat not flour to allow local millers to add value,” said Chapfika.
Industry and Commerce minister Mike Bimha said Chinamasa did well by “looking more on the policy thrust of supporting the productive sectors and creating an enabling environment for our investors rather than just figures”.
Mashakada said this was all wishful thinking
- US$4 billion budget for 2016 from US$4,1bn in 2015 which was revised to US$4bn;
- Total revenue collection for 2016 projected to US$3,85bn form US$3,5bn in 2015;
- Projected budget deficit of US$150 million;
- Recurrent expenditure at US$3,685bn;
- Government wage bill seen at US$3,919bn in 2016;
- Streamlining of the wage bill, mainly targeting youth officers, agricultural extension workers, non-payment of salaries to teachers at non-government schools and reduction of student teacher allowances, set to save US$14,2m monthly or US$170m annually;
- Civil service employment figures, minus army establishment, jump 36% since the multi-currency system, from 203 000 in 2009 to 276 000 in 2014;
- GDP to grow by 2,7% in 2016;
- Inflation rate to average -1,2%;
- FDI estimated at US$614m in 2016 from US$545m;
- Broad money supply to grow by 6,7% to US$5bn by end of next year;
- Duty on imported canopies increased and drop side panels from 10% to 40%, with effect from January 1 2016;
- Specific duty of US$0,50 per kg for soap with effect from January 1 2016;
- Duty increase on selected fabric that can be produced locally from 10% to 40% plus US$2,50/kg, with effect from January 1 2016;
- Rebate of duty on imported raw materials for use in the manufacture of clothing by a further period of two years;
- Customs duty on wheat flour up from 5% to 20%;
- Flat rates of excise duty to promote transparency in the determination of excise duty and also ease the administrative burden on Zimra;
- Mining sector to grow by 2, 4%;
- Capital equipment duty scrapped;
- Diaspora remittances projected at US$960m by end of year from US$800m in 2014;
- Exports are expected to grow to US$3,7bn next year from US$3,4bn this year;
- Education gets biggest share of budget, US$810m, while Home Affairs (US$396m) and Defence (US$357m) get a combined 19% of budget;
- Health allocated US$330m in the 2016 budget;
- Royalties on gold reduced to 3% from 5%;
- Government to take over Ziscosteel’s debt and lay off all workers, new investor sought after collapse of Essar deal; and
- Chinamasa pins hope for economic recovery on re-engagement with international lenders and domestic reforms.