Subsidies and other Market Distortions
Market distortions associated with subsidies present an additional risk to macroeconomic and fiscal stability. In particular, subsidies on fuel, electricity and agriculture have, in the past, led to large and often unpredictable expenses.
Updates by Tinotenda Samukange, Ronald Magweta, Moses Matenga & Fidelity Mhlanga
Where subsidies are deemed essential and can be financed,these will need to be clearly targeted and reflected in the Budget with adequate budgetary provisions.
To ensure effective implementation of the proposed subsidy policy, additional measures will be taken to tighten eligibility to subsidised goods and services so that only those who are eligible can benefit.
Fuel and Electricity Pricing
Government has already instituted new pricing frameworks for fuel and electricity that adequately reflect costs, including those resulting from changes in import prices and exchange rate fluctuations.
The pricing framework for fuel also ensures that pump prices remain comparable to those charged in neighbouring countries, so as to remove arbitrage opportunities arising from illicit fuel exports.
The 2020 Budget Objectives and Thrust
Mthuli Ncube says the 2020 National Budget marks the exit from austerity to growth stimulation and employment generation era through promotion of production oriented investment and productivity, without losing focus on fiscal responsibility.
The 2020 Budget prioritises the following areas:
• Productivity and growth;
• Jobs creation;
• Promotion of more sustainable and inclusive development;
• Export diversification and import substitution.
The growth and productivity thrust will be supported by the reengagement process with the International Community which will enable us to meet our Budget objectives.
The State of the Economy
Finance Minister Mthuli Ncube says the year 2019, started with good prospects,following the introduction of key macro-fiscal reforms aimed at stabilising and resuscitating the economy, in line with the Transitional Stabilisation Programme (TSP) objectives.
Allow me to share a quote from Orson Whitney (A famous religious leader):“No pain that we suffer, no trial that we experience is wasted …, it ministers to our education and development…”
The reforms, which were centred on “Austerity for Prosperity” were in no way a retribution, especially in view of the fact that our public finances were not balancing, following years of unsustainable fiscal deficits. To correct that, the New Dispensation had to put aside the notion of short cuts, magic solutions, and loose funding, by strengthening fiscal discipline and tightening monetary policy, in order to start rebuilding the economy.
This primarily entailed switching priorities from unproductive fiscal operations to sound and responsible fiscal spending, which placed the fiscus on the right path.
And indeed, during the course of the year, specific millstones were made, particularly in sanitising public finances, implementation of structural reforms, infrastructure
rehabilitation, social services delivery, among other achievements.
With regards to the fiscus, implementation of fiscal consolidation reforms saw consistent monthly budget surpluses or savings reaching ZWL$1.4 billion between January and August 2019.
Similarly, the current account managed to deliver a positive balance of US$116.4 million during the first half of the year, which all pointed to positive signs for restoring the much needed macro-fiscal stability, and elimination of the ‘twin deficit’.
15:24 Industry and manufacturing
Local content strategy will increase exports and industrialisation..
Pharmaceuticals, steel production.. Treasury will give IDC $ 240 million. Companies will get guarantees scheme to$ attract capital.. Treasury 368 million for industry ministry
On Gold mining Government is aware of retention levels issues.. They receiving much attention.
15:22 MMCz will be supported with a credit guarantee scheme and $292 million will be set aside for exploration
15:20 Compensation 500 farmers have been paid…$380 million set aside for compensation in 2020
15:19 Irrigation will get $422 million
15:17 $165 million for drought shocks and early warning measures
15:16 Agriculture will get $1,9 billion for irrigation, agriculture extension, land survey
15:15 Emphasis will be on better planning and marketing system that ensure viability
15:14 The 2020 budget will ensure better jobs and productivity
15:14 Agriculture will grow by 5% in 2020
15:12 2020 government removed the grain subsidy.This will see GMB sell grain n wheat.. Thus will see GMAZ having an option to either import or buy locally.
15:12 Vouchers schemes for the vulnerables will be issued
To cushion the commuting public against the rising cost of transport, Government will continue to subsidies mass transport system as well as capacitate ZUPCO to provide an
efficient public transport system. In this regard, ZUPCO will be facilitated to purchase more reliable conventional buses.
15:10 Additional. Measures will be taken on subsidies to ensure that only those can benefit.
Fuel n electricity.. The pricing framework is made to ensure that its in-sync with regional prices
15:08 Refraining from non budgeted expenditure will be key in 2020
Wage compression has affected aggregate demand.
Treasury has made commitment to pay all civil servants bonuses by November 2019
15:05 Statutory funds projected at$ 2,6 billions
15:03 The pillars of 2020
Production, Growth job creation, export diversification n import substitution
58, 6 billion revenue generation projection for 2020
1,5% budget deficit projected
56,6 billion of expenditure
15:00 He expects continued improvement in fiscal discipline.
14:59 Inflation pressures arose from the exchange rate.. Pressure is coming from the parallel market.
14:59 We expect better rainfall in 2020 supported by irrigation.
14:56: 2019 faced a severe problems due to drought and power shortages.
14:58 Growth now projected to – 6% in 2019
14:58 To mitigate drought shocks.Domestic resources were mobilised.He thanked development partners for their contribution during Cyclone Idai period
275 000 people left w need for food by Cyclone Idai
14:55 Ncube parades new notes says they are tough and resilient.
14:51 He describes the budget as a people budget.. Theme of the budget is Gearing for high production, growth and job creation.
14:50 He express indebtedness to the august house through inputs from various portfolio committees..He says recommendations from civil society and citizens has been valuable
14:49 Ncube takes to the podium.
14:42 President Emmerson Mnangagwa has arrived.
14:37 Speaker of Parly says the Weep “shamu” for absconding MDC legislators will come in appropriate time adding that “enough is enough”.
14:34 Independent Norton legislator Temba Mliswa says MDC legislators must respect parliament by attending budget presentation. He says they are not sincere and “vakuda shamu inemunyu”.
14:09 Speaker of Parliament Jacob Mudenda leads prayer ahead of the budget presentation.
14:07 Chris Mutsvangwa, who is not an MP or Minister has just walked into Parliament.
14:01 Sitted next to Vice President Kembo Mohadi is Women Affairs minister Sithembiso Nyoni.
14:00 Mthuli Ncube says the budget is people centred and came after lots of planning and sleepless nights.
13:54 Meanwhile, the MDC MPs say they will not attend Parliament as they are all attending burial for departed colleagues in Chivhu and Marondera respectively. Party chairperson Tabitha Khumalo confirmed in an interview with`our reporter Moses Matenga.
13:48 Minister of Lands, Agriculture and Rural Resettlement Perrence Shiri walks in.
13:45 Minister of Youth, Sport, Arts and Recreation Kirsty Coventry gets in she is the first minister to enter the August House.
Members of parliament starts trickling in ahead of the 2020 budget presentation scheduled to commence at 14.45
13:24 No MDC MPs yet amid reports they are planning to abscond the budget presentation in protest over ED ‘illegitimacy’
13:21 Zanu PF supporters singing outside Parliament ahead of the budget presentation
13:20 Heavy Military and police presence outside Parliament at the Africa Unity Square side
13:17 The August house is still empty ahead of budget presentation this afternoon.