2020 Budget Fair, But Failed To Tick Crucial Boxes
When Finance and Economic Development Minister Mthuli Ncube stepped into the Chamber yesterday afternoon it was never going to be an easy task to balance high expectations on a plethora of competing needs against very limited resources at hand.
And kudos to him, he started by illustrating how he had cut a long list of “needs” that had spiraled expenses beyond ZWL$ 100 billion by managing to restrict the budget to just about ZWL$ 63 billion cognizant to the fact that expected revenues for the coming year will only reach ZWL$ 58.6 billion.
Compared to recent fiscal misbalances that have characterized the post- GNU era since 2013, this budget will run a modest 1.5 percent deficit and it’s very commendable.
Mthuli managed to tick the boxes around the area of social protection and inclusive development, in some cases with a bit of innovation for example the Youth Employment Tax Incentive (YETI) meant to encourage employment of young people.
The upward review of the intermediated money transfer tax from ZWL$ 20 to ZWL$ 100 was welcome just as other social safety nets including ZWL$ 500 million towards the harmonized cash transfers to the vulnerable, ZWL$ 1 billion towards food deficit mitigation and ZWL$ 450 million towards education for the vulnerable under the BEAM program which will see an increase in children catered for by the program from current levels of 415 000 children to 1, 2 million children.
More significant about this budget is the ZWL$ 200 million set aside for sanitary wear of school children which is highly commendable in the wake of unaffordability of sanitary wear particularly for the rural folks.
A huge budget was also put in place in social services such as health care (ZWL$ 6.5 billion) and education (ZWL$ 10.7 billion), the two biggest allocations.
However bearing in mind the challenges at the core of the economy’s stagnation or rather recession in 2019, the budget failed to capture the gist.
In 2019, the economy is expected to contract -6.5 percent on account of poor performance in the agriculture and mining sector.
Most sectors failed because of serious electricity cuts and going into 2020 the budget failed to articulate how the power crisis will be addressed.
The budget also failed to address the fuel shortages which have profoundly affected activity in the economy and this is its biggest undoing.
We go to the biggest elephant in the room which is inflation. Despite the Minister projecting that inflation will slow down to single digit level by Q1 2020, there are no guarantees from the budget, instead the budget is in conflict with itself and economic analyst, Pepukai Chivore sums it up.
“The single inflation forecast is therefore flawed given the driver of inflation is the exchange rate, without improvement in production demand for imports will still be high while exports will not significantly increase hence foreign currency pressures will trigger exchange rate spikes leading to inflation,” he said.
This is compounded by the removal of subsidies on grain (wheat and maize) to millers which is expected to spike food inflation.
Mix a combination of inflation, fuel shortages and low electricity supply, the forecast is gloomy.
The minister has also not touched the issue of medical doctors who have gone for months and the rest of civil servants salaries as this also led to unpleasant effects on the development of the country.
The 2020 National Budget has therefore managed to scrap the surface and addressed several needs on sight but far beneath the surface, underlying problems that characterized the misfortunes of 2019 have not been given remedial interventions.