2017 budget a huge yawn

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Finance Minister Patrick Chinamasa

FINANCE minister Patrick Chinamasa yesterday presented the 2017 budget which, to all intents and purposes, was nothing to write home about. His 2017 fiscal statement, ironically themed “Walking the Talk”, was a bankrupt delivery anchored on a theoretical ZimAsset policy document.

Zimbabwe Independent Comment
Zimbabwe 2017 Budget document

Despite a hushed tone of economic recovery underpinned by improved commodity prices on the international market next year, Chinamasa needs to start walking the talk immediately.

The statement touched on the contentious wage bill, which continues to gobble up around 91% of revenue, but to what end?.

Although Chinamasa threatened to deal with state enterprises by either disposing non-performing ones and selling equity to investors through private-public partnerships and rein in budget support to such entities, among other measures, it is too little too late, given that most of the so-called state enterprises are terribly rundown and desperately in need of working capital.

If anything, piecemeal attempts to address state enterprise problems and cutting on some components of government expenditure are commendable. The government ought to deal with the wage bill as a matter of urgency. Anything short of a drastic trim of the wage bill by letting go excess staff and acting on ghost workers is mere grandstanding on the part of government and Chinamasa.

Any such commitments to deal with the state enterprise problem in the economy where incompetent managers are appointed willy-nilly by politicians is closing the stable door when the horse has long bolted. With little room to manouevre fiscally, Chinamasa’s options are limited. Chinamasa announced austerity measures to control expenditure, including a freeze on public service employment and wages as it struggles to mobilise dwindling revenues while avoiding huge budget overruns that have become perennial over the years.

For instance, a budget overrun is expected to result in a US$1 billion deficit at the end of 2016. He also went for the easily taxable such as road traffic fines and raised the fines 100% in most cases.

Chinamasa said reliance on a shrinking formal tax base to fund critical sectors such as health is no longer sustainable for both the taxpayer and government. Although Chinamasa attempted to stimulate the economy through tax breaks for wine producers while continuing with the controversial Statutory Instrument 64 meant to help lift capacity, he did not explain where the funding for manufacturing companies would come from. Without strong action on the part of government to improve the ease of doing business, economic recovery will remain a pipe dream.

On the upside, Chinamasa ought to be commended for lowering transaction fees on the Zimbabwe Stock Exchange to make the bourse attractive. In the last 10 months, foreign investors have been liquidating their position on the ZSE, a development that saw market capitalisation decline.

The decision to rein in government expenditure is commendable, but when all is said and done, the budget presented by Chinamasa is largely much ado about nothing.

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