‘Mthuli economic review damp squib’

ZIMBABWE’S main opposition MDC Alliance party yesterday described the 2020 midterm budget and economic review statement presented by Finance Minister Mthuli Ncube as a damp squib for failing to address critical issues afflicting Zimbabweans such as price increases and low disposable incomes battered by runaway inflation.

Ncube did not announce any supplementary budget despite the increasing number of COVID-19 cases in the country, stating that there was no need to do so because 54% of the 2020 budget of $63 billion still remained unutilised.

But former Finance minister Tendai Biti, who is also MDC Alliance vice-president, said: “In fact, people were expecting that Ncube will bring in a new budget

in US dollars because the 2020 Zimbabwe dollar budget has been collapsed due to hyperinflation and COVID-19 and it was a cowardly presentation, where he failed to confront the real demons affecting this country.

“It is a disaster because the country is in an emergency situation of COVID-19 and people were expecting supplementary budgetary measures in US$ terms and at least even a statement on how the US$75 cushioning allowance for civil servants will be paid out,” Biti said.

In his statement, Ncube said ministries and government departments were spending within the approved 2020 budget and thus there was no need for a supplementary budget.

He said ministries had utilised 46% of their votes as of June 2020, implying that 54% of the original 2020 budget remained unutilised.

“This enables us to operate to the end of the year as we reallocate to cover the critical needs, especially those related to COVID-19 and social protection,” Ncube said.

“This position enables us to avoid tabling a supplementary budget, given our current levels of spending.”

Ncube instead proposed a dutyfree certificate facility for donated single and double-cab trucks with effect from August 1, 2020.

He also said excise duty on fuel would now be reviewed on a monthly basis.

On tax relief measures, Ncube said: “In order to minimise the tax burden, and also enhance disposable income, particularly during this period when a sizeable number of households are yet to recover from the effects of COVID-19 lockdown, I propose to review the tax free threshold from $2 000 to $5 000 per month.

“I further propose to adjust the tax bands to begin at $5 001 and end at $100 000, above which the highest marginal tax rate of 40% will apply, with effect from August 1, 2020.”

While health personnel have been downing tools in anticipation of United States dollar salary payments, Ncube only proposed to exempt them from tax on their COVID-19 risk allowances for a period of 12 months beginning April 1, 2020.

On health related donations, he said: “I propose to review the maximum allowable deduction on donations by corporate to the local currency equivalent to US$100 000.”

Opposition MPs interjected heavily when Ncube claimed that food mitigation measures were also being channelled to vulnerable citizens in urban areas.

“The level of vulnerability during the lockdown increased and to mitigate against the effects of the lockdown, $50 million has been availed so far for support to the transitory poor households,” he said.

The security sector was also given $197 million to enforce lockdown restrictions.

On COVID-19 containment measures, Ncube said resources from the 2% intermediated money transfer tax were ring-fenced and channelled towards COVID-19-related mitigatory expenditures, with $738,5 million channelled to the Health and Child Care ministry for COVID-19 risk allowances, employment costs due to employment of additional staff, capacity building, procurement of equipment and personal protective equipment and rehabilitation and construction of isolation units.

He said revenue collection had exceeded expectation, adding: “Cumulative revenue collections for the period January to June 2020 are estimated at $34,2 billion, against a target of $32,1 billion. This resulted in a positive variance of $2,14 billion, 7% of projected revenues, notwithstanding the slowdown in economic activity that has been induced by COVID-19,” he said.

Ncube claimed that the economy was expected to register a GDP growth of about 7,4% in 2021 before moderating to around 5% thereafter.

Biti, however, said the Treasury boss’ projections were “fictitious and dishonest”, saying Ncube’s projections that the economy would shrink by 4% were not possible, adding, “... my projection is that it will shrink by 16%”.

“People are facing high inflation levels of 1 400% and yet no statement was made on how to address hyperinflationary measures.

“People were expecting a statement which will address the massive shortages of fuel, where it is now being sold in US$ and everything is indexed in US$, including vehicle registration. His mid-term review is a total rejection of critical issues affecting people. This mid-term review statement is a total disaster,” Biti charged.

“His budget surpluses are hot air as people are hungry and civil servants are underpaid. He failed to address the closure of the Zimbabwe Stock Exchange, the delisting of Old Mutual, and the closure of bulk EcoCash transactions and the serious market distortions in the agriculture sector, where tobacco and cotton farmers are complaining about payment and cotton farmers have $300 million trapped in EcoCash (agent lines).”

THE lukewarm 2020 mid-term budget and economic review statement by Finance and Economic Development minister Mthuli Ncube is nothing, but figment of his fertile imagination devoid of substance as it failed to address key issues affecting the people of this great country.

We are cognisant of the fact that criticism is not one of the key tenets of the ruling Zanu PF regime, and so this will not surprise the world if the bulk of the so-called economists will praise the statement for its high-sounding words signifying nothing.

It is a fact that the long-suffering citizens of this country require a reprieve as of yesterday, but here we go again – nothing coming out of this so-called professor of world economics. We suggest this man returns to the chalkboard lecture rooms again – otherwise with the way things are going, this might not end well.

It boggles the mind how Ncube missed an opportunity to cushion the citizens through a supplementary budget in the face of the fast-depreciating local currency and ballooning COVID-19 cases. Critically, the minister also failed to address the self-re-dollarisation of the economy and of course how government intends to deal with increasing cases of people requiring assistance.

This is due to the fact that social security is being driven by the depreciating Zimbabwe dollar and hyperinflation as businesses chase the parallel forex exchange rate to maintain the value of their goods and services.

There is no doubt that Zimbabwe is in an emergency situation and citizens expected some cushioning. Yet, did Ncube address these issues –zilch? According to him, this was not necessary as 54% of the original $63,6 billion 2020 budget remained unutilised. Yet, half of the nearly +15 million population are food insecure. Clearly, the minister has left the vulnerable citizens to the vagaries of the unstable economy.

Of course, Ncube hopes that inflation will come down gradually in the second half of 2020, from the peak of 785,5% in May 2020, to 300% in December 2020. How this will happen still remains a mystery given the inflationary pressures being stoked.

Although Treasury raised the minimum tax threshold to $5 000 from $2 000 per month to stimulate economic activity as the move increases disposable income, the problem is with a cost of living estimated at US$250 or $17 220, his efforts are moot. The estimated cost of living includes rentals, transportation, food and non-food priority costs such as healthcare and school fees which are largely left out of official statistics. All this renders Ncube’s budget review statement a moot exercise.

One is tempted to quiz the minister, indeed if there was any positive variance; why were social security needs growing and why is government failing to fund critical capital projects to stimulate growth?

We hope that his 2% tax on foreign currency transactions of between US$5 and US$100 000 will yield positive results only if it’s not meant to raise ready cash for the ruling elite fat cats. The fact that any foreign currency transaction beyond US$100 000 will attract a US$2 000 tax is highway robbery. With the mooted Victoria Falls Stock Exchange, who will bring money to burn just like that to a country yearning for investment.

Otherwise, it seems the mid-term 2020 budget review statement was merely that, a statement!