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Mthuli Ncube pleads poverty

by Staff reporter
04 Nov 2019 at 11:22hrs | Views
FINANCE minister Mthuli Ncube has said the fiscus has no capacity to meet the demands by ministries after eight government departments bid for $112 billion in the 2020 national budget.

Ncube yesterday told MPs at the pre-budget seminar in Victoria Falls that proposals by the eight ministries far exceed the resource envelope he had available for the 2020 National Budget.

Although he did not mention how much his resource envelope for the 2020 budget would be, it is most likely range between $35 billion and $40 billion.

The Office of the President and Cabinet, Parliament, 20 ministries and 10 provincial offices, independent commissions and several other departments expect to be funded through the fiscus.

Of the eight ministries, the highest bid for 2020 came from Home Affairs, which demanded $32 billion, followed by the Defence, which wants $25 billion, Health ($18 billion), Agriculture ($14 billion), Local Government ($9 billion), Industry ($6 billion), Labour ($5 billion) and Transport ($3 billion).

"Mr Speaker Sir, I have noted the huge resource requirements being demanded by all ministries, but as you are all aware, the capacity of the budget to finance expenditures is dependent on the capacity of the economy to generate revenues," Ncube said.

"Mr Speaker Sir, analysis of only eight bids submitted by the following line ministries (Home Affairs, Defence, Health, Agriculture, Local Government, Industry, Labour, Transport) indicate resources requirements of $112 billion, which far exceed the total resource envelope for the 2020 Budget," he said.

Ncube said the revenue generation capacity of the country was still too low.

"From our deliberations, you will agree with me that revenue generation capacity is still low due to a number of challenges. The budget ceilings that have been given by Treasury are, therefore, derived from the anticipated resources envelope from taxes and what we can borrow from the market without destabilising the economy. We also need to be mindful that unrestrained expenditures financed through unsustainable means are the major source of economic instability we are battling today," he said.

"However, I have to admit that this year is unique due to the high inflationary environment, and hence would like to announce that total expenditure ceiling is being revised upwards from $28 billion by a factor of above 30%. This should provide a window to finance some of the additional budget requirements from line ministries over and above the ceilings already provided."
Ncube told MPs that even in advanced economies, resources were never enough to meet budget requirements.

He said it was important to become more results focused so that allocated resources are used efficiently and effectively and matched with performance, in line with the principles of results-based budgeting.

"Mr Speaker Sir, we should also mobilise additional resources through public private partnerships, loans and grants to complement budget revenues. It is, however, unacceptable to note that despite the economic challenges that we have and the need for improved service delivery by our citizens, some ministries have inefficient programme managers who do not diligently plan, implement, monitor and evaluate their programmes resulting in low absorption of budget and giving the impression that this is due to inadequate resources."

On complaints by MPs that for the 2019 budget, Ncube had failed to disburse funds to ministries on time, he said unplanned natural disasters such as Cyclone Idai had put pressure on the budget.

"The budget performance was adversely affected by external shocks of drought and Cyclone Idai, which brought in unbudgeted expenditures, thereby crowding out other budgeted expenditures. While we may have collected more than we had budgeted for, the exchange rate and inflation pressures eroded the real value of the funds, affecting budget implementation," he said.

During the five-day pre-budget seminar, MPs also suggested that royalties and mining fees be paid in local currency and that foreign currency retention be reviewed.

"MPs should consider that Zimbabwe needs to accumulate foreign currency reserves. Ideally we should sufficiently have import cover of at least six months. Our current reserve levels are nowhere near enough and this is unacceptable and explains some of the foreign debts and balance of payments challenges we face. These requests should, therefore, balance the desire to increase investments and national strategic interests, especially on matters involving depleting natural resources," Ncube said.

On the issue of retention thresholds of foreign currency for mining firms, which were increased from 30% to 55% to ensure viability of operations in the sector, Ncube said government would continue to monitor the situation, including developments on the international commodity markets with a view of engaging mining houses on any further required support to guarantee sustained viability of mining houses.

"We recognise that as the other sectors recover, the mining sector will continue to be the major generator of foreign currency in the economy and hence the Ministry of Finance will give full support to the mining sector during 2020," he said.

Ncube also said government has embarked on the setting up of the Pension Retention Fund for public servants as part of the restructuring measures of the pension payment framework.

"Treasury has since disbursed $70 million as seed capital for the purpose of operationalisation of the Fund, which according to the responsible ministry, will require resources in excess of $60 billion to sustain all future payments. Hence, capitalisation of the fund will be done on a phased approach," he said.

Source - newsday

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