US$1bn stimulus for economic recovery

27 Jul, 2014 - 06:07 0 Views
US$1bn stimulus for economic recovery

The Sunday Mail

cashFinance and Economic Development Minister Patrick Chinamasa has crafted a US$933 million Supplementary National Budget to stimulate economic recovery, while a freeze on civil service salaries and job recruitments will be maintained to limit Government expenditure.

The package awaits Cabinet approval.

Minister Chinamasa last year presented a US$4, 2 billion budget in which he said policy consistency, credibility, certainty and transparency were critical blocks for confidence-building in the economy.

In a Staff-Monitored Programme Letter of Intent and Technical Memorandum of Understanding, jointly signed by Minister Chinamasa and Reserve Bank Governor Dr John Mangudya, it was noted that given constrained financial space stemming from large maturities on Treasury Bills and loans in 2014, the US$933 million package would deal with some of the challenges hampering economic growth.

The money is expected to be largely raised from customs revenue and taxes.

“Given the downward revision to the economic outlook for 2014, there are significant risks to the revenue side of the budget. In addition, our financing space is quite constrained, as we are facing large maturities on domestic Treasury Bills and loans in 2014.

“To address these challenges, the Minister of Finance and Economic Development presented a package of additional revenue and expenditure measures to Cabinet in early-June 2014. The package amounts to about US$933 million (6,9 percent of GDP) and places a heavier weight on revenue measures, including US$554 million (4,1 percent of GDP) from selective increases in customs duties, targeted tax compliance operations, non-tax revenues mobilised largely by redirecting surplus resources in several extra-budgetary funds, and from measures to address custom revenue leakages,” reads part of the letter.

Minister Chinamasa said Government would not review civil servant salaries this year so as to keep the wage bill down.

After a salary review this year, the wage bill increased by 14 percent, far exceeding projected inflation.

The least-paid Government employee is earning US$375 while nurses and teachers get about US$500 per month.

“However, we remain committed to our objective of keeping the overall wage bill on a downward trend relative to Government revenues and expenditures in the medium term, while preserving the real value of salaries of the civil service,” reads another portion of the letter.

“Like we did in 2013, we commit to granting only one salary adjustment in Zimbabwe. The 2014 Budget provided for an eight percent increase to the overall wage bill.

“Following the conclusion of negotiations in the National Joint Negotiating Council in January 2014, the overall wage bill is now projected to increase by 14 percent this year.

“The larger increase resulted from the need to make good on the Government’s election commitments. We have already identified cuts in non-wage non-interest spending, relative to the 2014 National Budget Statement, in order to completely offset these wage increases.

“The wage increase significantly exceeds projected inflation for 2014.”

Minister Chinamasa said Government would maintain the recruitment freeze implemented in July 2012 while allowing limited flexibility in filling critical vacancies where necessary.

He also said Government would not make any draw-downs from Special Drawing Rights holdings in 2014, as these constituted the core of Zimbabwe’s international reserves.

The IMF allocated US$505 million to Zimbabwe in August 2009, to shore up reserves as part of a bailout given to member countries.

Minister Chinamasa said: “We will avoid selective debt servicing, as this would complicate reaching an agreement with creditors on a debt resolution strategy.

“However, we will continue to make repayments to creditors that are providing us with positive net new financing. In line with our fiscal projections for 2014, we shall begin to make efforts to rebuild our international reserves in the second half of the year.”

Government, he added, remained committed to taking the necessary measures to achieve the primary balance target, including mobilising mining revenues.

Minister Chinamasa said as part of efforts to restore sanity in parastatals, Government capped senior managers’ remuneration.

He said Government was amending the Public Finance Management Act to strengthen the Finance Ministry’s oversight of public enterprises and local authorities.

“In particular, the amendments will require all public entities to submit their corporate and financial plans to the Minister of Finance and Economic Development before the beginning of the new fiscal year.

“The Minister of Finance and Economic Development will be given powers to direct boards to amend the corporate and financial plans if necessary.

“The amendments will direct public entities to submit quarterly financial statements and performance reports not later than thirty days after the end of the respective quarter.”

The minister said his office had also started reviewing the Procurement Act to tighten the public procurement framework and make it more transparent.

This follows numerous reports that State-linked entities flout tender regulations thereby prejudicing Government of millions of US dollars.

By Brian Chitemba – Investigations Editor

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