Finance minister Tendai Biti will today present his Mid-Term Budget Review statement expected to see a downward review of the 2011 projections spelled out in the National Budget presented in November last year as the economy continues to show signs of distress.
Faced with a projected fiscal deficit of $500 million, largely as a result of civil servants’ salary increments, Biti is hard- pressed to come up with new measures that will restore confidence and promote economic growth.
A fortnight ago, the Confederation of Zimbabwe Industries (CZI) threatened to resort to public demonstrations if government failed to heed its calls to address issues affecting the viability of local companies.
Economic analyst Joseph Mverecha said it was highly unlikely that government would be able to meet the $2,7 billion revenue target set last year in November as the economy was slowing down.
He said cumulative revenue for the first six months to June amounted to $1 255 billion indicating that government may only be able to raise between $2,4 billion and $2,5 billion by December this year.
“The economy was slowing down, it is bowled down with the indigenisation law as currently structured by government,” he said.
Mverecha said the Indigenisation and Economic Empowerment Act — which compels companies to ensure that indigenous peoples hold a 51% stake in firms — was scaring away investors, adding that the greater chunk of the budget would go towards civil service wages and very little on capital expenditure.
“It’s difficult for government to do anything as long as the economy remains the same. We need significant capital for new equipment for our factories to compete with other countries to a large degree in energy, mining and manufacturing,” he said.
Mverecha however said there is potential for the economy to grow especially for the mining, agriculture and manufacturing sectors.
Economist John Robertson said the economy was not in a healthy state as the country had failed to attract meaningful funding from outside. He said government should fund key sectors like education, health and infrastructure development.
“If the money is channelled to wages that means no money will be used to pay for what government is supposed to pay for,” he said.
Robertson doubted government’s ability to sustain the additional $40 million incurred this month owing to the salary increments. Addressing Parliament earlier this month, Biti warned Zimbabweans to brace themselves for punishing the Mid-Term Budget Review.
He ruled out a supplementary budget as government was incapacitated as the country was failing to meet its revenue collection target.
“Unfortunately, there is no capacity at the present moment to actually increase our revenue as the 2011 budget of $2,7 billion was money anticipated to be accumulated up to December 2011. The country was supposed to amass revenue of up to $230 million in March, but failed to do so,” said Biti said a fortnight ago.
He said it was only in March and June that the $230 million margin was reached, during which the ministry received quarterly payments for corporate taxes. In the first six months, “acceptable revenue” was short by $100 million.
He cited competing needs including grain procurement, constitution-making and foreign trips by government officials.