Zimbabwe’s minister of Finance and Economic Development, Mthuli Ncube, presented his national budget statement on the 22nd of November themed “Austerity for Prosperity”. It was focused around the Transitional Stabilisation Program which was launched in October and will run until December 2020. The program was implemented in order to help realise Vision 2030 and it aims to stabilise the macro-economy and financial sector, launch quick wins to stimulate growth and to introduce necessary policy and institutional reforms to transform to a private sector led economy. Vision 2030 seeks to grow the economy to middle income status (per capita gross national income of between $1, 005 and $12, 235) by the year 2030.
It is clear from the budget statement that Zimbabwe is focused on economic revival and on improving foreign relations. This has been President Emmerson Mnangwagwa’s goal since being sworn in November last year. His mantra is “Zimbabwe is Open for Business” and he insists that they (Zimbabwe) cannot remain mediocre. Mthuli Ncube Stated in the presentation that “Through international isolation, we have lost immensely as a nation. Particularly through deprivation of access to international capital markets, technology, trade among others, resulting in low economic growth”.
According to the budget statement, revenue collections for 2018, January to September, amounted to $3.8 billion against a targeted $3.4 billion. Collection of $5.5 billion are anticipated by year end. Total expenditure for the year is expected to reach $8.2 billion, implying a deficit of about $2.7 billion. Ncube stated that the cumulative deficit was on account of un-budgeted expenditures relating to employment costs, support to agriculture as well as some capital expenditure and net lending items.
Total revenue for 2019 was estimated at $6.6 billion and total expenditure at $8.16 billion. This leaves a budget deficit of about $1.56 billion or 5% of GDP. The economy is expected to grow by 3.1% in 2019. Annual inflation gained 15.46% to reach 20.85%.
I was looking forward to this budget speech particularly because Zimbabwe has been facing a cash crisis these past few weeks due to foreign currency shortages which many have labelled a repeat of 2008 and so I wanted to know how the government planned on tackling it. The budget reiterated the cost cutting and revenue increasing measures that were put in place. These included the 2% tax on electronic money transfers, 5% cut on basic salary for all senior positions including state owned enterprises, retiring government officials above the age of 65 and weeding out ghost workers.
They also plan on privatising at least five public enterprises with hopes that this would raise about $350 million. On the downside, I don’t know why Zimbabwe still insists on using a multi currency system with the US dollar being the currency of reference. It honestly makes more sense to adopt the Rand.
I think the most interesting part of the budget was the $53 million set aside for compensation of former white farm owners. This by the way is just a fraction of the $9 billion that the government has to pay out in total. The land issue has become a global debate and I’ve always maintained that expropriation without compensation should only apply to unused land. No one should be left homeless. Therefore I believe that this is a step in the right direction for Zimbabwe because not only is it equitable, it will definitely help strengthen foreign relations.
Overall, it was a very detailed and constructive budget. It clearly demonstrated that the country is working on reviving their economy. They are looking at what went wrong and how to fix it, and I think they deserve some credit for that.