Critical analysis of 2018 Budget

10 Dec, 2017 - 00:12 0 Views

The Sunday Mail

Tamuka Mukura
FINANCE and Economic Development Minister Patrick Chinamasa presented the much awaited 2018 National Budget Statement last week titled, “Towards a New Economic Order”, in keeping with the recent political developments.
With the budget coming against a backdrop of deteriorating macro-economic stability as evidenced by low production and export levels, high unemployment and low investor confidence, expectations are high that the new Government led by President Emmerson Mnangagwa will deliver.

This is so because in his inauguration speech, he promised to hit the ground running.

Minister Chinamasa’s 2018 budget projects $5,07 billion revenue, which is fair although the cause for concern is the over-reliance on tax revenues which account for 84 percent.

While revenue collections from January to September 2017 stood at US$2,812 billion, Treasury projects 2018 tax revenues at $4,3 billion; quite an optimistic target. Expenditures are estimated at $5,74 billion giving a projected budget deficit of $675,8 million. Commitment to fiscal discipline promised by Minister Chinamasa will determine whether the targeted deficit will be achievable.

This is so because over the years, the budget figures have been little more than ‘figures’ given the huge gap between allocated and disbursed amounts, rendering the effective budget way less than the one announced.

One of the key issues pointed out by Minister Chinamasa is fiscal indiscipline which has led to the breakdown of budgetary systems resulting in unsustainable and persistent budget deficits. His admission of this economic evil is a major step in the right direction. We do not want to go down the road of quasi-fiscal expenditures and unsustainable Treasury Bills and overdrafts, especially where the funds are channelled towards recurrent expenditures.

In this light, measures such as reducing the size of delegations on foreign trips and reserving first class for the presidium only are very welcome.

Furthermore, the one vehicle limit for Permanent Secretaries and vehicle loans for the directorate will result in massive savings for Government. What remains to be seen is whether or not Minister Chinamasa will bite the bullet and implement the tough measures regarding the civil service wage bill.

The retirement issue must have sent a bolt of lightning down the spines of those affected.

Cognisant of the wiping out of pensions by the hyperinflation, it is hoped that the start-up loans linked to the retirement benefits will provide a much-needed cushioning effect. The bringing of payroll and pensions under Treasury will also help in monitoring employment costs.

Nevertheless, while the size of the civil service is indeed an issue, it is only one side of the equation. Government has to find ways of raising more revenues, both tax and non-tax, as there is a limit to the sustainable downscaling of the civil service.

The cost and ease of doing business reforms remain critical and the momentum so far gathered should be maintained on an upward trajectory. Slackness and red tape should not be tolerated in public offices.

However, these reforms should not be international investor-oriented only, local investors are equally important and their concerns should be addressed. Critical also is movement from rhetoric to action in the fight against corruption.What is needed are prosecutions and prohibitive sentences without fear or favour.

The introduction of the Zimbabwe Public Investment Management Guidelines is very timely. Precious resources have been lost due to questionable tender awards and procurement systems, poor quality assurance and monitoring and evaluation, especially where sub-contracting is involved.

If what the minister says is anything to go by, finally some heads will roll in the parastatals.

Keeping most of these parastatals on life support has only benefitted their executives at the expense of the economy. Parastatals have to justify their existence or have the plug pulled.

Government has to crack the whip on those breaching the 30 percent salary threshold set by Cabinet. On the Cold Storage Company (CSC), while the resuscitation of the cattle scheme may increase the national herd, what may be worrying is whether the meat processing equipment can still be feasibly rehabilitated.

Furthermore, the choice of NSSA as the driver of this resuscitation inspires little confidence given its own performance issues. The amendment of the Indigenisation and Economic Empowerment Act, limiting the 51/49 threshold to platinum and diamonds only while sparing all other minerals and sectors is a good signal to international investors which may open up more opportunities for foreign direct investment flows.

However, it is very important that we do not throw away the baby with the water. Due diligence is still critical to ensure that our citizenry benefits either directly or indirectly from any investment arising from this new policy dispensation.As foreign investors flock in, locals will definitely need to negotiate good deals otherwise all will be lost. Compensation for Bilateral Investment Promotion and Protection Agreements (Bippas) violations and acquired land also sends a positive signal to international investment, especially with regards to safety of investment.

In agriculture, the Minister touched on the conscientious area of offer letters and 99-year leases but with no detail save for a statement of intent, no different from the rhetoric.

The new administration seems to be throwing caution to the wind on this hot issue. Mention is also made of land audits to be done by the Land Commission.

One wonders whatever happened to the results of the previous land audit. The scaling down of the Command Agriculture initiative while paving way for commercial bank and private sector financing is welcome as this will reduce the distortionary effects of the programme through crowding out of non-participating farmers in the credit and input markets.

This in no way down plays the gains realised from this history-making intervention.

Going forward, it may need to shift its attention to agricultural mechanisation especially tillage, harvesting and storage equipment and infrastructure in addition to driers.

Efficient and effective post-harvest handling is critical to consolidating the gains of the programme.

Generally, Minister Chinamasa seems to have hit the right notes in his budget statement. However, what will distinguish it from yesteryear statements is nothing else but the very elusive implementation.

There is great optimism though, that Minister Chinamasa will deliver this time around given the political will that has so far been demonstrated by President Mnangagwa.

This is the critical ingredient that was missing in the implementation matrix of the previous administration. Policy consistency and prudent management of currently available domestic resources will send the right message to the international financiers and investors that we are trying to court as we endeavour to increase our production and exports in the new economic order.

 

Tamuka Mukura is an economics lecturer at the University of Zimbabwe. He is also a PhD economics candidate in the School of Accounting, Economics and Finance at the University of Kwazulu Natal. He can be contacted via email: [email protected]

 

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