Finance minister Patrick Chinamasa urgently needs to put in place measures to contain government expenditure and stabilise the economy, business leaders and analysts have said.
BY TARISAI MANDIZHA
Chinamasa is set to announce his mid-term fiscal policy review next month at a time when revenue inflows have dwindled to record levels.
According to latest statistics from the Zimbabwe Revenue Authority (Zimra), collections in the second quarter were $861,83 million against a target of $892, 88 million.
Economist Kipson Gundani said Chinamasa had to send a bold statement stating how he intended to contain government expenditure.
The wage bill constitutes 66% of total revenue, with government promising to cut that to 50% by 2019.
“I think we need to appreciate the facts on the ground where we are increasingly seeing government revenue shrinking, our economic growth is static at around +/-1% and also there is little or no foreign direct budgetary support,” Gundani said.
“So Chinamasa’s budget is utilising only internally generated resources, but to hold everything constant, the ideal thing that he should do is to contain government expenditure.”
He said there was need to address the cost drivers in the economy and to reform underperforming public enterprises.
“There is need for parastatal reforms, to try and make them business entities,” he said.
He, however, said Chinamasa should also continue to push for the international re-engagement process to mobilise external resources.
Confederation of Zimbabwe Industries vice-president Sifelani Jabangwe said Chinamasa had to announce measures that stabilised the economy.
“[The] key issue is the stabilisation of the economy, because at the moment there is support for the business sector through the SI 64 of 2016 but there is need to address the issue of cost drivers to improve competitiveness,” Jabangwe said, adding that there was need to improve the level of formalisation of the economy and how the issues were affecting competitiveness.
Zimbabwe National Chamber of Commerce chief executive officer Takunda Mugaga said Chinamasa should deal with the issue of primary cash balances, tax refunds, tax invasion and avoidance, corruption in parastatals and state enterprises and find ways of broadening the tax base.
“The first thing Chinamasa has to deal with are primary cash balances. He should address the issue of outstanding salaries and he should make sure it balances,” Mugaga said.
He said there was need to address tax invasion and tax avoidance and also that government should broaden and deepen the presumptive tax head.
“If the economy is informal, there are many people who are not taxed and the government should use presumptive tax in dealing with this,” he said.
Economist and former Economic Planning minister Tapiwa Mashakada said Zimbabwe was facing a fiscal policy crisis that had seen the accumulated budget deficit reaching $5 billion since 2013. He said fiscal revenues had shrunk so acutely below $4 billion while recurrent expenditure stood at around $4,8 billion per annum.
Mashakada said government was failing to pay civil servants on time and the economy was in deflation while re-engagement efforts were hanging by the thread due to a deteriorating political environment.
He said there was a nexus between fiscal policy and the financial crisis, hence the need to address the cash shortages.
“The other issue is the question of how to deal with imports without increasing import bans which have attracted public anger. In short, the economy needs stimulus measures to resuscitate production and kick in growth,” Mashakada said.