THE Budget and Finance Portfolio Committee chaired by Zanu PF legislator Felix Mhona (Chikomba Central) yesterday ripped into Finance minister Mthuli Ncube’s 2019 National Budget statement and questioned the credibility of some of his projections.
BY VENERANDA LANGA
Mhona presented the committee’s report on the 2019 budget, where he said the overall economic growth projection of 3,1% and reducing the budget deficit from $2,8 billion to $1,6 billion were unrealistic.
MDC Alliance MPs cheered as Mhona presented a critique of the budget put together by the committee, while Zanu PF legislators remained awe-struck.
“The committee observes that the 2019 overall growth projection of 3,1% may be difficult to achieve given the challenges the economy is facing such as foreign currency supply and allocation inefficiencies, exchange rate misalignment, inflationary pressures and reduced aggregate demand,” Mhona said.
“The committee is also of the view that the budget deficit of $1,6 billion in 2019 from $2,8 billion in 2018 is ambitious given the prevailing macro-economic environment and tight fiscal space.
“Inflation is projected to close at 25,9% in 2018 from an initial budget target of 3,01%. In 2019, inflation is projected to close at 5% and to increase to 5,5% in 2020 and 5,8% in 2021. The committee feels that these inflation projections are highly optimistic and will likely be missed, considering foreign currency shortages which are likely to push parallel market rates.”
The committee said Ncube’s announcement that there will be an increase in excise tax on fuel and payment of duty in forex for selected goods was expected to push inflation up.
“Expected low rains will also have a bearing on the food inflation. That together with the high cost of agricultural inputs may dent the anticipated inflation targets.”
The committee said it was also concerned with the insistence in the budget that the real time gross settlement (RTGS) to bond and US dollar exchange rate at a ratio of 1:1 in an economy where three-tier pricing was operating.
“This situation has been strengthened by recent policy pronouncements related to differentiation of local currency and nostro accounts. The pre-budget strategy paper for 2019 correctly points the exchange rate misalignment and the existence of a parallel market with a premium of 70% for every US$ to the RTGS/bond (local currency) in June 2018,” Mhona said.
“This misaligned exchange rate essentially means that the government is subsidising consumers using surrendered forex from exporting firms. The inconsistencies arising from such a position is the contributing factor to the current confidence deficit.”
Mhona said there are also going to be challenges for Ncube that will arise from implementing a US$ budget with a devalued bond or RTGS payment system which implies huge costs on programme implementation.
“The fallacy of a US$ budget against bond notes medium of exchange is threatening the implementation of this budget and negates the impact of the proposed reforms as the allocated resources are inadequate to meet expenditure forecasts, in real terms. The committee wonders how the budget is going to account for revenue and expenditure where one part is forex and the other RTGS/bond. One cannot discount the potential for illegalities and rent seeking behaviour,” Mhona said.
The committee said the Parliament’s allocation of $101 million constituting about 1,47% of the budget against a request of $163 million was inadequate.
“The vehicle loan scheme (for MPs) with rebates on duty was allocated $15,75 million out of the $21 million requested, which translates to $45 000 per MP,” Mhona said.