2019 budget to consolidate reforms
THE 2019 national budget statement, which is set to be announced end of November, is expected to consolidate the fiscal reforms Government has embarked upon, principally cutting expenditure and accelerating the privatisation of State Enterprises and Parastatals (SEPs).
The reforms are aimed at propelling Zimbabwe towards a prosperous and empowered upper middle income status by 2030.
Last week, Finance and Economic Development Minister, Professor Mthuli Ncube said he will present the 2019 national budget towards the end of November.
Prof Ncube has indicated plans to contain Government spending, which has seen both domestic and external debt sharply rising to US$16,9 billion, driven by domestic borrowing mainly through Treasury Bills (TBs) and overdrafts.
The stock of outstanding TBs as at June 2018 is US$6,7 billion, with a maturing value of almost US$8,3 billion.
During the period 2017 to June 2018, Government issued TBs and bonds amounting to US$4,3 billion to cover the financing gap. Last week, Prof Ncube said it was critical to address the state of Government finances to bring stability and predictability in the operating environment.
Currently, the environment makes it difficult for companies to plan for the longterm, particularly due to foreign currency shortages.
Government intends to cut the various facets of its spending, including the wage bill and foreign trips, where delegations have already been significantly trimmed following President Emmerson Mnangagwa’s intervention.
Said Prof Ncube: “On the internal front is the whole issue of the state of Government finances, the so-called fiscal position, which, again without stabilising that, it’s not easy for you to do business in Zimbabwe. How do you price, how do you plan, how do you run the business going out three to four years?
“So some of these fiscal measures we are talking about are meant to close that gap and clip fiscal equilibrium and move that deficit down to single digits within a period of years.
“We will be taking additional measures in the Government cost containment (wage bill). If the people of Zimbabwe decide that we will pay our tax, we as Government will have to meet them half way to contain expenditure and we are going to do that.
“You will see in the budget, I am presenting the budget towards the end of November after the consultations.”
In the first six months of the year, the fiscal deficit was estimated at US$1,4 billion and is projected to shoot to US$2,7 billion by year end in the absence of corrective measures.
The Transitional Stabilisation Programme (TSP), the country’s latest blueprint which runs from October 2018 to December 2020, says the fiscal deficit is a “major cause for macro-economic instability and financial sector vulnerability”.
The civil service wage bill and pension gobble almost 90 percent of revenues generated. There are plans to reduce the wage bill by US$200 million in next year’s budget and US$130 million in the 2020 budget as efforts to tame expenditure gather momentum, representing 0,7 percent and 0,4 percent of the Gross Domestic Product (GDP), respectively. Government plans to reform the civil service so as to manage the wage bill.
Already, some senior staffers have been retired. The operational level, the civil service reform, aims to change the existing “orientation, structure, functioning, temperament, performance, efficiency and ethical base as the vital cog charged with the planning, implementation and improvement of national welfare and achievement of the development results for the benefit of all citizens”.
Government intends to reform parastatals, with some being fully privatised while others will be partially privatised and others will be “buried”.
Prof Ncube said privatisation of at least 11 companies will be fast-tracked, with deals expected in the next six months.
“We are going to be privatising and privatising fast. I am pushing hard to make sure that we privatise some parastatals.
“It can be 11 of them, within six months, we have to make progress. And I am also insisting that if privatisation happens, some of the equity is listed on the Zimbabwe Stock Exchange (so as) to deepen our capital markets. Let’s do that and make sure that there is local participation, not just foreigners with deep pockets,” said Prof Ncube.
Parastatals have become the biggest albatross on fiscus as most of them are perennial under-performers relying on Government support.
Operations of some are so opaque that they keep financial results as a closely guarded secret to duck scrutiny.
In 2016, 38 out of 93 SEPs incurred a combined US$270 million loss due to weak corporate governance practices and ineffective control mechanisms.