Zimbabwe: Govt Urged to Address Chronic Budget Deficit
The manufacturing sector has called for a cocktail of measures in the 2020 national budget to address the chronic budget deficit.
Finance minister Mthuli Ncube is expected to present the 2020 budget on November 4 amid a rapidly worsening economic implosion which his 2019 budget premised on “austerity for prosperity” has failed to address, especially in relation to the structural problems in the economy.
Last month, Treasury published a pre-budget strategy paper which the Confederation of Zimbabwe Industries (CZI) president Henry Ruzvidzo said is pointing in the right direction with regards the manufacturing sector, although it is vital to ensure implementation is taken seriously.
“Industry expects the budget to have strong measures that address the chronic budget deficit problem. We expect measures to stabilise the macro environment, particularly local currency devaluation. While the comments in the paper point in the right direction, the devil is in the detail of implementation and the discipline to maintain course. In our sector import substitution, export-led industrialisation and strengthening of value chains are important strategies for government to put us right back on track, “he said.
In the paper, Treasury said the budget seeks to restore production as well as increase capacity utilisation of the local industry under the pillars and strategies which include import substitution, export-led industrialisation, strengthening value chains, industrial parks and innovation hubs, research and development.
This comes at a time the central bank has announced the introduction in two weeks of new notes, which analysts say will further drive inflation, while accounting professionals have already declared that the country has now entered hyperinflation.
The sector has been hit hard by foreign currency shortages, which have left it battling with scarcity of raw materials, resulting in suppressed production and reliance on antiquated machinery which needs in excess of US$500 000 for retooling.
Due to myriad of challenges that are economic driven, the sectors’ capacity utilisation is seen going down to 30% from the projected 40,8% as the sector is failing to cope, especially with currency related problems.
In this regard, Ruzvidzo said the sector was also looking forward to measures that will stimulate local production and consumption of local products while incentivising local investment and supporting the local content strategy.
“We are also expecting a budget that will address the tax burden on the productive sectors to stimulate production and a commitment to addressing the ease of doing business conditions,” he said.
Recently industrialist Busisa Moyo said it was important for government to consider scrapping some taxes on the formal sector, especially the punitive 2% tax saying it had become one of the deterrents to production as the costs of business has increased substantially as a result.
During the multi-stakeholder public debt conference in Harare this week, Zimbabwe Coalition on Debt and Development (Zimcodd) socio-economic analyst Tafadzwa Chikumbu said the country was expecting seriousness on the part of government in terms of the way it crafts its budgets, saying over the decades there has not been anything new except for the figures and currency in circulation.
“If you take the 2001 national budget and the last budget, you will realise everything has remained the same except maybe for currency changes. Government has to be serious in terms of re-strategising its efforts for us to be really going somewhere and it starts with the budget itself,” he said.
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