Harare – Zimbabwe’s 2020 national budget presented by Finance minister Mthuli Ncube on Thursday failed the confidence test as it left many Zimbabweans with mixed feelings, ENN reports. The national budget, presented under the theme, “gearing for higher productivity, growth and job creation” is premised on revenue collections of ZWL$58.6 billion against an anticipated expenditure of ZWL$63.6 billion. The anticipated GDP is equivalent to US$3.66 billion using the country’s official exchange rate. This means Zimbabwe will run a budget deficit of 1.5% if it achieves its budget forecasts.
Bread, Mealie Meal and Stock Feed Prices are Set to Shoot up Again
Zimbabwe’s current economic challenges are a function of financial indiscipline, corruption and policy inconsistencies which continue to dry up the country’s foreign capital inflows. One highlight of issues that invoked mixed feelings amongst the citizenry is the reduction of value added tax from 15% to 13.5% at a time the same budget announced that it will be removing government incentives on wheat and maize to millers effective 1 January 2020, effectively pushing the prices of wheat products, animal stock feed and mealie-meal in Zimbabwe up again. Being an agro-based economy, the impact of price increases in wheat and maize look set to exceed the price reductions from the VAT adjustments, ENN asserts.
Mthuli Ncube highlighted that fuel and electricity prices will continue to be driven by regional cost trends, informed by currency exchange rate movements in the country. This has made the cost of doing business in Zimbabwe expensive for local manufacturers in light of their antiquated plant and equipment, as well as high cost of borrowing due to Zimbabwe’s country risk profile. Previously, fuel suppliers and other strategic sectors to the government of Zimbabwe enjoyed preferential access to foreign currency. The newly promulgated single exchange rate model for foreign currency will stabilise and improve currency availability in the country for the private sector to fund its foreign obligations only if it is supported by productivity, which requires uninterrupted electricity supplies and consumer disposable incomes that stimulate demand.
The tax incentive for companies that employ youths sounds theoretical considering that most Zimbabwean companies are retrenching employees. Zimbabwe must focus more on fixing its agricultural sector, which promotes mass employment through the value chain impact if it is to make meaningful progress on job creation. Download a copy of the 2020 Zimbabwe National Budget here