FINANCE and Economic Development minister Mthuli Ncube last week presented a national budget, which many say is anti-poor.
Ncube turned a deaf ear to appeals by business and labour to repeal the 2% Intermediated Money Transfer Tax (IMMT) charged on transactions of between ZW$10 000 and ZW$500 000.
While he should be commended for cutting IMTT on United States dollar transactions from 4% to 2%, Ncube’s decision to maintain the former, a source of constant pain to an already overtaxed and over stretched consumer, demonstrated his determination to beef up government’s war chest at the expense of millions of suffering Zimbabweans.
However, it was refreshing to note that Ncube will not be charging IMTT on payments to wheat farmers, whose production is projected at 380 000 tonnes this year.
While the government sees the 2% IMTT as a cash cow, it has become an albatross around the necks of ordinary Zimbabweans, who are barely making ends meet – it has added an extra burden on the unravelling budgets.
The dramatic decline in living standards has turned the daily lives of most Zimbabweans into an unbearable pain.
World Bank (WB) statistics released last month showed that Zimbabwe had the highest food inflation globally, underlining the depth of a cluster of internal shocks, along with Russia/Ukraine conflict–induced cost pressures, which have been sweeping across global markets in the past few months.
The global lender said Zimbabwe’s aggregate food inflation stood at 321% during the period, a notable leap ahead of second placed Lebanon, whose rate was estimated at 208%.
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Only one other African country, Rwanda, featured on the "Top 10 Countries Hit Hardest by Inflation" list, with 41% food inflation.
In addition, according to the Hunger Hotspots Food and Agriculture Organisation of the United Nations and World Food Programme early warnings on acute food insecurity, October 2022 to January 2023 Outlook, Zimbabwe is among the hunger hotspots.
The report said continued currency depreciation has contributed to a steep rise in annual inflation rates, significantly eroding households’ purchasing power.
These are the issues that need to be immediately tackled, instead of exerting fresh pressures on Zimbabweans.
This week, an equally concerned labour market analyst and former Employers Confederation of Zimbabwe (Emcoz) executive director John Mufukare told the Zimbabwe Independent: “These are bread and butter issues that need to be addressed. When the tax was introduced, everyone thought it would be a stopgap measure for the government to improve its revenues before removing it”.
I totally agree.
The economy is in dire straits.
The cost of living continues to spiral out of control. Prices of goods, including basic commodities, critical medical drugs and rentals have soared in the past months.
The Zimbabwe dollar continues to depreciate.
The macroeconomic situation remains volatile. It negatively affects livelihoods and access to food, especially among poor households.
This is compounded by the United States dollar being the preferred currency of trade. Most commodities and services are either charged in USD or parallel market rates are applied for Zimdollar payments.
As part of efforts to tame inflation, Ncube has since his appointment pursued some form of a contractionary fiscal policy — high taxes and lower government expenditure.
On the monetary front, the Reserve Bank of Zimbabwe is upholding a hawkish stance - that of the highest interest rates in the world.
In the budget, Ncube should have attempted to keep government expenditure in check and avoid excessive spending whose effect is inflationary.
But recurrent expenditure remains high.
To cushion ordinary Zimbabweans, the finance minister should not have increased value added tax (VAT), another source of pain, from 14,5% to 15%.
He could have reduced the 2% taxes to 1% as they increase the cost of doing business and living for ordinary Zimbabwe, who bear the brunt of high taxes.
He also should not have increased duty on fizzy drink from ZW$0,05 to ZW$0,10, given buying power is already subdued.
The ordinary people just wanted some relief for once.