2018 Na­tional Bud­get: Fis­cal dis­ci­pline re­quired

The Sunday Mail (Zimbabwe) - - BUSINESS NEWS - Tawanda Musarurwa Se­nior Busi­ness Re­porter

WITH pub­lic con­sul­ta­tions for the 2018 Na­tional Bud­get hav­ing com­menced last week, in­di­ca­tions are that Trea­sury will need to work hard to sat­isfy ex­pec­ta­tions on the ground.

Par­tic­i­pants have gen­er­ally called for in­creased so­cial spend­ing. But this may be dif­fi­cult due to the huge bud­get deficit which cur­rently stands at around 8,4 per­cent of the coun­try’s Gross Do­mes­tic Prod­uct (GDP).

On Wed­nes­day, var­i­ous or­gan­i­sa­tions’ rep­re­sen­ta­tives and in­di­vid­u­als at the con­sul­ta­tive meet­ing in Harare raised is­sues re­lat­ing to the need for eq­ui­table job cre­ation and im­prove­ment in liv­ing wages.

Some of the pro­pos­als in­cluded avail­ing loans to in­dus­try at ac­ces­si­ble rates, in­creased ben­e­fi­ci­a­tion in the min­ing sec­tor, is­suance of bonds at com­pet­i­tive rates, up­ward re­view of civil ser­vants salaries and in­creas­ing the tax-free thresh­old, among other sub­mis­sions.

Other par­tic­i­pants urged the Gov­ern­ment to make sure there is ad­e­quate fund­ing for re­search and de­vel­op­ment, which is con­sid­ered a crit­i­cal el­e­ment in boost­ing eco­nomic growth.

Such pro­pos­als cer­tainly make sense in­so­far as a low ag­gre­gate de­mand, low ca­pac­ity util­i­sa­tion and low wage equi­lib­rium sug­gests that the econ­omy re­quires a stim­u­lus.

How­ever, the multi-cur­rency sys­tem pre­vail­ing pre­cludes any mon­e­tary pol­icy stim­uli, hence only fis­cal stim­u­lus is presently de­ter­min­is­tic.

But what is also ap­par­ent is that some, if not most of the sub­mis­sions that were made by par­tic­i­pants, will more likely put pres­sure on the 2018 Na­tional Bud­get.

Cur­rent cap­i­tal bud­get al­lo­ca­tions of be­low 16 per­cent of the to­tal bud­get are far be­low best prac­tice thresh­olds of close to 25 per­cent, re­quired for pro­mot­ing sus­tain­able de­vel­op­ment.

It is there­fore crit­i­cal that Gov­ern­ment moves to con­tain con­sump­tive ex­pen­di­tures in or­der to free up re­sources for cap­i­tal in­vest­ments, as well as achiev­ing de­sir­able deficit tar­gets.

This is es­pe­cially so in view of a con­strained fis­cus notwith­stand­ing an an­tic­i­pated rise in rev­enue col­lec­tions for the year of circa $6 bil­lion.

The Zim­babwe Rev­enue Author­ity (Zimra)’s an­nual gross col­lec­tions amounted to $3,462 bil­lion last year.

Trea­sury may just suc­ceed in meet­ing these ex­pec­ta­tions if “un­nec­es­sary ex­pen­di­tures” are re­duced as per Cab­i­net di­rec­tive.

Cab­i­net at its 18th meet­ing held on June 13, 2017 di­rected the adop­tion of a num­ber of spe­cific mea­sures.

Fi­nance and Eco­nomic De­vel­op­ment Min­is­ter Pa­trick Chi­na­masa, in the 2018 Pre-Bud­get Strat­egy Pa­per, says the fo­cus of the up­com­ing bud­get will be on re­duc­ing the fis­cal deficit.

“In view of the widen­ing fis­cal im­bal­ances, the 2018 Na­tional Bud­get sub­mis­sions from min­istries and de­part­ments should, there­fore, in­cul­cate fis­cal con­sol­i­da­tion to re­solve challenges re­lated to the un­sus­tain­able high fis­cal deficit.

“Ac­cord­ingly, Cab­i­net di­rected that Trea­sury adopt deficit tar­get­ing, un­der­pinned by rig­or­ous mon­i­tor­ing of Bud­get im­ple­men­ta­tion,” said Min­is­ter Chi­na­masa.

“As di­rected by Cab­i­net, Trea­sury will fo­cus on con­tain­ment of the ‘bud­get deficit’ as one of the key fis­cal an­chors.

“An im­proved bud­get po­si­tion has a pos­i­tive im­pact on ex­pen­di­ture and debt man­age­ment, and cre­ates fis­cal space for fund­ing de­vel­op­ment pro­grammes, as well as at­tain­ment of over­all macroe­co­nomic sta­bil­ity.”

Of­fi­cial fig­ures show that since 2014, the level of the bud­get deficit as a per­cent­age of GDP has been on the in­crease, from 1,2 per­cent to a deficit of 8,7 per­cent and 8,4 per­cent in 2016 and 2017, re­spec­tively.

Trea­sury is look­ing to halv­ing the bud­get deficit to 4 per­cent of GDP, and sub­se­quently move to a “bal­anced bud­get” by 2020.

At this point in time, Gov­ern­ment is un­likely to be able to fund ev­ery bud­getary re­quire­ment, but can struc­ture and pri­ori­tise those ar­eas that have trig­ger mech­a­nisms for econ­omy wide gains, hence the de­vel­op­ment of the sec­ond phase of Zim-As­set (the first phase is up in 2018), which will stip­u­late the coun­try’s medium-term strate­gic di­rec­tion, de­vel­op­ment priorities and im­ple­men­ta­tion strate­gies.

Min­is­ter Chi­na­masa

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