No surprises in Mthuli’s 2022 Budget
INANCE and Economic Development Minister Professor Mthuli Ncube’s 2022 National Budget Statement is unlikely to carry any surprises as the Treasury boss is expected to stick to fiscal policies already outlined in the National Development Strategy 1 (NDS1).
Zimbabwe is currently in the middle of implementing the NDS1, programmed to last until 2025 following its launch and implementation with effect from 2021.
The NDS1 outlines the strategies, policies, legal and institutional reforms, programmes and projects to be implemented over the five-year period, to achieve accelerated, high, inclusive, broad-based and sustainable economic growth as well as socio-economic transformation and development.
The successful implementation of NDS1 is preconditioned on a number of key success factors including consolidating macroeconomic stability during the NDS1 period, which will be critical for enhancing certainty and confidence in the economy by anchoring exchange rate and inflation.
According to the five-year plan, priority will be to strengthen fiscal and monetary co-ordination, ending all quasi-fiscal activities, curbing of all unbudgeted expenditures and deepening the market-based foreign exchange rate system.
NDS1 is expected to be anchored on strengthening revenue collection efforts through reviewing and streamlining tax incentives, formalising the informal sector, upgrading of the audit and tax services of large taxpayers, as well as linking ZIMRA systems with other agencies.
On the expenditure side, the strategy will be to strictly adhere to the approved budget limits and stop accumulation of arrears, review the subsidy policy to ensure better targeting, fast track State enterprise and parastatal reforms and full roll-out of the Public Finance Management System to ensure full utilisation.
Minister Ncube has indicated he will stay on this course and maintain the current fiscal regime.
“Consistent with the objectives of NDS1, the priority areas for the forthcoming national budget remain largely unchanged from 2021,” he said.
Responding to Parliamentarians at the pre-budget seminar in Victoria Falls held this week, Minister Ncube indicated that the Government will not be deviating from the policy path set out in NDS1, one of which is to strictly adhere to the approved budget. Amid line ministries’ demands for approximately a $3 trillion spending kitty, Minister Ncube stuck to his
guns and said only $900 billion was available.
He said the total requests by line ministries were “beyond our capacity, and more fundamentally, poses challenges from a prioritisation point of view”.
Minister Ncube added that the Government would continue to be dependent on the revenue generation capacity of the economy and its ability to borrow sustainably.
On the tax regime, not much change is expected either with Minister Ncube shooting down requests for a downward review of Value Added Tax saying with the tax head contributing 28 percent of Government revenue, any changes to the tax rate will have a significant impact on revenue flows to the fiscus.
He said funding of inescapable expenditures such as infrastructure development, social protection initiatives and procurement of medicines, among others, could also be affected if VAT is changed.
“It should also be noted that given the very high rate of informalisation of the tax regime, and leakages from our import and border controls, VAT remains the most efficient final tax that captures the widest range of taxpayers.”
Minister Ncube promised a pro-poor budget, pointing out that priority interventions, will go towards addressing the needs of the poor which resonates with the major thrust of NDS1 of ‘leaving no-one and no place behind’.
He pointed out that the Government will continue to strengthen the Public Finance Management System in order to address risks to budget sustainability, especially the accumulation of domestic arrears and extra-budgetary expenditures.
Minister Ncube promised further rationalisation of the recurrent expenditures and redirecting of savings towards infrastructure development.
The plan is also to rationalise subsidies and ensure that such expenditures are explicitly budgeted for, quantified and approved through the Annual Estimates of Expenditure.
Disbursements by the Treasury will be strictly limited to available revenue and within the approved budget.