HomeAnalysisNcube’s budget review fails the pro-poor test

Ncube’s budget review fails the pro-poor test

BY KUDZAI KUWAZA

THE mid-term fiscal budget presented by Finance minister Mthuli Ncube last week is anti-poor as it failed to provide relief for the majority of the populace who are suffering as a result of the economic decline worsened by the impact of Covid-19.

Ncube stuck to his policies announced in the 2021 National Budget last November, saying he would not review tax-free thresholds to ameliorate deteriorating living standards.

The Treasury boss said the economy was rebounding, thus there was no reason to shift policies.

“The measures put in place so far are working. There is no reason to change policies. Despite the global pandemic, implementation of the National Development Strategy 1 through the 2021 National Budget remains on course, following a favourable farming season, recovery in manufacturing sector and firming international commodity prices,” Ncube said.

Consumers have been overstretched by a worsening economic environment, characterised by a debilitating liquidity crunch, foreign currency shortages, low capacity utilisation and massive job losses.

Landlords have been demanding rentals in United States dollars at a time when salaries are paid in the depreciating local currency.

The domestic currency has been extensively battered since January when it was trading at about US$1:ZW$100, to current levels of about US$1:ZW$150 on the dominant parallel market.

This is a far cry from the rosy picture painted by Ncube of an economy which is on an upward trend.

Ncube maintained a ZW$10 000 (US$116,68) tax-free threshold announced in November, which is four times less than the poverty datum line of ZW$40 682 (US$466,74). This is also despite the sharp increase of prices of goods and services prompted by the promulgation of Statutory Instrument 127 which penalises issuance of local currency receipts for foreign currency purchases and pricing goods above the official auction rate among other measures.

The lack of substantive safety nets in Ncube’ mid-term budget review will be keenly felt at a time many have lost their incomes after being rendered jobless as a result of the impact of the Covid-19 pandemic.

The World Bank estimates that 500 000 Zimbabweans have lost their jobs since the outbreak of the scourge in the southern African country early last year.

In its report titled Zimbabwe Economic Update: Overcoming Economic Challenges, Natural Disasters and the Pandemic: Social and Economic Impacts, the global lender said Covid-19 has affected both urban and rural households in equal measure. It revealed that 7,9 million Zimbabweans, which is nearly half the country’s population, are living in abject poverty.

“Nearly 500 000 Zimbabwean households have at least one member who lost her or his job, causing many households to fall into poverty and worsening the plight of the existing poor. Wage earners in urban areas were also disproportionately affected by the pandemic, as their pay was cut, or no pay was received at all. Rural households, who rely less on wage employment and depend on farm business were less impacted,” the Bretton Woods institution noted in its report.

In addition, the majority of those eking a living through the informal sector have had their businesses closed as the fight to combat Covid-19 continues.

There is need for a rethink on how Ncube tackles the economy, according to labour market expert and former Employers’ Confederation of Zimbabwe executive director John Mufukare.

“The Finance minister should try to address the economy from the bottom of the pyramid upwards which will generate surpluses to the top of the pyramid,” Mufukare prescribed.

He said instead of rumbling about budget surpluses, he should put in place measures to ensure that those who make a living manage to work in a suitable environment, which would contribute to meaningful growth of the country’s fiscus.

“We could do much better than we are doing at the moment,” Mufukare said.

In a damning indictment of Ncube’s efforts towards the poor, expenditure patterns released during his mid-term budget review indicated that money deployed to the security sector, particularly the Ministry of Defence, was more than funds channelled towards combating the deadly Covid-19 pandemic, which has claimed more than 3 500 lives. It was also much more than money provided to improving livelihoods in the first half of the year.

The data showed that the Defence and War Veterans ministry had already expended ZW$14,5 billion (US$169 million) during the first half of the year, which represents 61% of its annual vote totaling ZW$23,8 billion (US$277,7 million).

This is more than ZW$12,1 billion (US$141,2 million) expended during the same period towards input support programmes for the vulnerable households and wheat farming for the 2020/21 agriculture season. It is also more than the ZW$9,4 billion (US$109,68 million) spent on the Ministry of Health in the first half of the year.

The mid-term fiscal budget failed dismally to adequately address the needs of the poor, according to the Zimbabwe Congress of Trade Unions secretary-general Japhet Moyo.

“The budget was not pro-poor. You will see from the allocations certain sectors such as defence got a bigger chunk where the health sector got less than what was prescribed by the Abuja Declaration,” Moyo said.

The Abuja Declaration was an agreement by African countries to allocate 15% of its revenue towards the health sector.

Moyo said the absence of a well-paid civil service and adequately staffed and equipped hospitals as well as the lack of jobs indicates that there is no improvement in the country’s economic performance.

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