News / Local
Biti rips into Ncube's 'disastrous' budget
03 Dec 2023 at 12:33hrs | Views
FORMER Finance minister Tendai Biti has described the 2024 budget as a disaster amid concerns that the proposed raft of taxes will deepen Zimbabwe's poverty levels and worsen the economic challenges.
Finance minister Mthuli Ncube presented the $58,2 trillion budget on Thursday last week where he proposed a review of the Strategic Reserve Levy by US$0.03 and US$0.05 per litre of diesel and petrol respectively, an increase in toll fees on premium roads and passport and selected fees charged by the Central Vehicle Registry.
Ncube also wants to introduce a levy of US$0.02 per gramme of sugar contained in beverages, excluding water, a wealth tax levied at a rate of 1% of market values of residential properties with a minimum value of US$100 000 and a l% levy on gross proceeds of lithium, black granite and other cut or uncut dimensional stones and quarry stones.
Biti told a 2024 national budget review and analysis breakfast meeting hosted by the Zimbabwe Independent, in Harare on Friday that the proposed financial expenditure plan showed that the government was living beyond its means.
He said Ncube's budget also exposed the dire need for reforms to bring Zimbabwe's economy back on track.
"We must also live within our means," he said.
"We must amend the Public Finance Management Act.
"We must amend section 11 of the Public Borrowing Act so that the government lives within its means and does not run a budget deficit of more than 1% of the gross domestic product.
"What is killing us and running inflation up is the money supply that comes through not living within our means. We need to control the budget deficit."
Biti who was Finance minister at the height of Zimbabwe's first dollarisation phase between 2009 and 2013, said it was time to abandon the local currency for the second time.
President Emmerson Mnangagwa's government re-introduced the Zimbabwe dollar in 2019 after a decade of dollarisation, but the local currency has been losing value rapidly against major currencies.
Analysts say the economy is re-dollarising as shown by the widening use of the US dollar, but the government insists that the local currency is here to stay.
"We must dollarise again," Biti said while commenting on what Ncube could have done differently with the budget.
"The second thing is that we must float the local currency.
"We must scrape the auction system. We need to find a resting place for the Zimbabwean dollar. It has been done in this economy before."
The 2024 budget is 157,29% higher than last year's year expenditure plan of $22,6 trillion.
Gift Mugano, a respected economist, said the budget was anti-poor because of the basket of new taxes.
"The budget, which was presented by the minister of Finance is a weapon of mass destruction," Mugano said.
"It is going to push us back into poverty. I was asking myself the question, who is going to be the victim of the tollgate fee raise?
"The one who is hit the most by the toll gate fees is the rural folk who will be travelling to the cities to get their pensions.
"The bus fares are going to increase and the people who are going to pay are our rural folks. The tollgate fees for the buses have risen by 200%."
He urged opposition Citizen Coalition for Change and ruling Zanu-PF legislators to put aside their differences to resist some of the measures that were contained in the budget when it comes up for debate in Parliament.
"If the Zanu-PF Members of Parliament do not reject this budget it means that they want the people in the rural areas who voted for them to suffer," Mugano said.
He said one way government could have reduced the need to raise taxes was to ensure there were enough grain reserves to minmise the impact of El Nino.
Alpha Media Holdings chief executive Kenias Mafukidze said the budget should have been presented in United States dollars to create a clear definition of the size of the economy for proper planning.
Reserve Bank of Zimbabwe monetary policy committee member Persistence Gwanyanya, however, defended the budget saying the proposed taxes were necessary to protect the economy from global shocks.
"Zimbabwe by its structure is a commodity economy," Gwanyanya said.
"It is minerals supported economy to be specific.
"Concerning inflows that come into the country, 85% come from minerals.
"Right now, they have gone down to 50-54% thereabout.
"The reason is that the revenue from the minerals has significantly reduced.
"Given this unhealthy makeup of the economy, it is unavoidable that the pressure is going to be felt. The reaction from the budget could be a geopolitical situation and the El Nino drought-induced situation.
"Now to put it into context again, in the next two seasons, this region is expected to experience drought of historic proportions."
He said the economic problems facing the country had nothing to do with policy or macroeconomic policy.
"It has something to do with confidence," Gwanyanya said.
"We have done all the basics for the economy to stabilise, and I can confidently say the rejection of the Zimbabwean dollar has nothing to do with policies. The main challenge is confidence."
Zimbabwe's economy has been heavily weighed down by high inflation and currency problems for over two decades.
Finance minister Mthuli Ncube presented the $58,2 trillion budget on Thursday last week where he proposed a review of the Strategic Reserve Levy by US$0.03 and US$0.05 per litre of diesel and petrol respectively, an increase in toll fees on premium roads and passport and selected fees charged by the Central Vehicle Registry.
Ncube also wants to introduce a levy of US$0.02 per gramme of sugar contained in beverages, excluding water, a wealth tax levied at a rate of 1% of market values of residential properties with a minimum value of US$100 000 and a l% levy on gross proceeds of lithium, black granite and other cut or uncut dimensional stones and quarry stones.
Biti told a 2024 national budget review and analysis breakfast meeting hosted by the Zimbabwe Independent, in Harare on Friday that the proposed financial expenditure plan showed that the government was living beyond its means.
He said Ncube's budget also exposed the dire need for reforms to bring Zimbabwe's economy back on track.
"We must also live within our means," he said.
"We must amend the Public Finance Management Act.
"We must amend section 11 of the Public Borrowing Act so that the government lives within its means and does not run a budget deficit of more than 1% of the gross domestic product.
"What is killing us and running inflation up is the money supply that comes through not living within our means. We need to control the budget deficit."
Biti who was Finance minister at the height of Zimbabwe's first dollarisation phase between 2009 and 2013, said it was time to abandon the local currency for the second time.
President Emmerson Mnangagwa's government re-introduced the Zimbabwe dollar in 2019 after a decade of dollarisation, but the local currency has been losing value rapidly against major currencies.
Analysts say the economy is re-dollarising as shown by the widening use of the US dollar, but the government insists that the local currency is here to stay.
"We must dollarise again," Biti said while commenting on what Ncube could have done differently with the budget.
"The second thing is that we must float the local currency.
"We must scrape the auction system. We need to find a resting place for the Zimbabwean dollar. It has been done in this economy before."
The 2024 budget is 157,29% higher than last year's year expenditure plan of $22,6 trillion.
Gift Mugano, a respected economist, said the budget was anti-poor because of the basket of new taxes.
"The budget, which was presented by the minister of Finance is a weapon of mass destruction," Mugano said.
"It is going to push us back into poverty. I was asking myself the question, who is going to be the victim of the tollgate fee raise?
"The one who is hit the most by the toll gate fees is the rural folk who will be travelling to the cities to get their pensions.
"The bus fares are going to increase and the people who are going to pay are our rural folks. The tollgate fees for the buses have risen by 200%."
He urged opposition Citizen Coalition for Change and ruling Zanu-PF legislators to put aside their differences to resist some of the measures that were contained in the budget when it comes up for debate in Parliament.
"If the Zanu-PF Members of Parliament do not reject this budget it means that they want the people in the rural areas who voted for them to suffer," Mugano said.
He said one way government could have reduced the need to raise taxes was to ensure there were enough grain reserves to minmise the impact of El Nino.
Alpha Media Holdings chief executive Kenias Mafukidze said the budget should have been presented in United States dollars to create a clear definition of the size of the economy for proper planning.
Reserve Bank of Zimbabwe monetary policy committee member Persistence Gwanyanya, however, defended the budget saying the proposed taxes were necessary to protect the economy from global shocks.
"Zimbabwe by its structure is a commodity economy," Gwanyanya said.
"It is minerals supported economy to be specific.
"Concerning inflows that come into the country, 85% come from minerals.
"Right now, they have gone down to 50-54% thereabout.
"The reason is that the revenue from the minerals has significantly reduced.
"Given this unhealthy makeup of the economy, it is unavoidable that the pressure is going to be felt. The reaction from the budget could be a geopolitical situation and the El Nino drought-induced situation.
"Now to put it into context again, in the next two seasons, this region is expected to experience drought of historic proportions."
He said the economic problems facing the country had nothing to do with policy or macroeconomic policy.
"It has something to do with confidence," Gwanyanya said.
"We have done all the basics for the economy to stabilise, and I can confidently say the rejection of the Zimbabwean dollar has nothing to do with policies. The main challenge is confidence."
Zimbabwe's economy has been heavily weighed down by high inflation and currency problems for over two decades.
Source - newZwire
