LACK of political commitment in the 2005 national budget presented before parliament last month will make it difficult for the budget to achieve its intended objectives, economists told a post-bu
dget discussion this week.
Moses Chundu, an economist with CFX Financial Services, said acting Finance minister Herbert Murerwa should have made bold statements and reference to relations between Harare and the international community, led by the World Bank and group associates.
“The absence of political statements will make it difficult for the budget to attain its objectives, given that the resuscitation of the economy is largely dependent on relations with international financiers,” Chundu said.
“How will it address issues of investor confidence if it is silent on relations with the International Monetary Fund and the World Bank?”
On the proposed policy to levy new farmers, Chundu said the level of resistance to tax in the past shows that “we have a long way to go before we can implement such a policy”.
Of concern to economists, Chundu said, was the limited revenue sources upon which the budget derives its earnings.
He argued that the budget was aimed at deriving most of its earnings from unsustainable individual taxes.
“The bulk of revenue is from individual tax and this is not sustainable considering that corporate tax contributed only 10% to total revenue,” Chundu noted.
The CFX economist further argued that overall savings alluded to by Murerwa were actually funds earmarked for pending projects which had not been implemented.
“There are no savings, some of the funds had been budgeted for civil servants’ salaries which were however not awarded during the year while some of the funds were for pending projects such as Tokwe-Mukorsi dam construction,” he said.
In his budget presentation, Murerwa said savings had remained low and are estimated to be about 1,7% of GDP this year.
On the 30% corporate tax rate, Chundu said that the rate was “too harsh” and encouraged tax evasion.
He said it was still 10% higher than industry’s recommendations of 20%.
University of Zimbabwe economist Clever Mumbengegwi said although it appeared there is now greater co-ordination between the fiscal and monetary policy unlike in the past, the budget concentrated itself on three major targets — inflation reduction, achieving growth in real gross domestic product and the achievement of social protection.
Mumbengegwi said the budget was not an ambitious outline since it was presented after the monetary policy early this year, followed by the mid-term policy review and then the 2005 to 2006 Macro-Economic Policy Framework.
On inflation, Mumbengegwi said there is a lack of accurate GDP figures from the government’s Central Statistical Office (CSO).
“We do not have accurate figures from the CSO and therefore figures currently released are inconsistent with the actual rate and will affect 2005 projections,” Mumbengegwi said.