Budget must inspire confidence — experts
FINANCE and Economic Development Minister Professor Mthuli Ncube presents the 2020 National Budget this afternoon that is expected to help create a fiscal environment that will stimulate production.
The Budget is expected to continue the fiscal discipline of the Second Republic, limiting options for Prof Ncube, but the primary Budget surpluses he has created, while not large, do give him leeway for targeted and controlled measures that can alleviate some burdens on the poor.
They also allow him to continue his programme of trying to shield civil servants, although these measures have to continue to be covered by tax revenues.
“If we have a situation where everyone comes with their trade union and demand higher salaries and wages, prices will keep going up and we will not win the battle,” economist Dr Gift Mugano said.
“As such, salaries should remain more or less the same for now.”
Another economist Mr Eddie Cross said with the Budget deficit under control, Prof Ncube will seek to boost incomes, including for Government workers in view of the high inflation.
“There is going to be increases in people’s salaries, but it’s going to be gradual and will be very carefully planned and monitored,” said Mr Cross.
“The other thing I think he is going to do is that he is going to strengthen the value of the Zimbabwe dollar.”
The growth-focused Budget, the first since the new dispensation, will need to contain measures to stabilise the exchange rate, which together with excessive money supply, have conspired to drive inflation and erode the value of savings and incomes.
Notably too, drought and the effect of natural disasters such as Cyclone Idai have also presented further challenges.
Dr Mugano said Prof Ncube’s Budget should inspire confidence among citizens and businesses, given what Zimbabwe has gone through economically over the past two or so decades.
He said there was no turning back on the Zimbabwe dollar, but it will be critical for the Budget to put in place measures to preserve the value of the currency.
To stabilise the exchange rate, Prof Ncube is expected to announce measures to substitute imports through incentivising local production and growing export receipts.
“When you substitute imports you reduce demand for foreign currency,” said Dr Mugano.
“Exports will thus, provide critical resources for the importation of critical products, which the country cannot manufacture or has little capacity to produce.”
Confederation of Zimbabwe Industries (CZI) president Mr Henry Ruzvidzo last week said industrialists expected measures that would boost capacity utilisation averaging 40 percent.
It is hoped that among the areas to be incentivised will be agricultural production and the manufacturing sector and all critical processes along the value chain within these strategic sectors of the economy.
This should also entail incentives for all economic agents that reduce imports or drive exports, more like incentives that accrue to investors operating in special economic zones.
Zimbabwe continues to lose significant foreign currency through non-essential imports and the Budget should contain measures, duties and taxes for example, to discourage the imports.