Govt in budget crisis

HARARE - Finance minister Patrick Chinamasa’s delay in presenting the 2014 national budget betrays massive economic difficulties, indecisiveness and empty State coffers, analysts said yesterday.

This comes after Chinamasa told a pre-budget consultative seminar in Victoria Falls last week that he needed more time before making his maiden budget presentation since assuming the finance portfolio in a substantive capacity on September 11.

The national budget is traditionally tabled before Parliament by mid-November and the postponement is unprecedented.

“The delay indicates that he faces difficulties and has no clear way on which direction the economy should take,” said independent economist John Robertson.

“The notion that the delay is to have more time for consultation is misleading. What the country needs right now is to deal with serious challenges such as boosting agriculture and increasing industry’s capacity to produce.”

Robertson said there was no way the minister could make up the budget figures without funds amid burgeoning recurrent expenditure and dwindling revenue collections.

“The government can no longer continue to rely on the already overburdened individuals and companies for revenue,” Robertson said.

“What needs to be done is to articulate economic policies that attract foreign investment and create an enabling environment for business.”

He noted that the government will have to rely on external budgetary support but it was unfortunate that Zimbabwe had reputational risk emanating from its failure to address its debt overhang of over $10,7 billion.

Government is frantically looking for budgetary support from China, and the request has been tabled before ambassador Lin Lin.

“As a country we need to deal with issues to restore investor confidence,” Robertson said.

“Right now we have few friendly countries who can lend us money without thinking twice about the risk of not getting it back. Even China has set conditions that we cannot even meet unless we demonstrate our sincerity through austerity measures.”

The budget presentation will come at a time when the country is dogged by inherent economic challenges — chief among them lack of investor confidence coupled with policy inconsistencies, an acute liquidity crisis and massive power and trade deficits among other challenges.

Former Finance minister Tendai Biti said Zimbabwe desperately needs external budgetary support to help revive its economy.

He said the greatest challenge in formulating the country’s 2014 budget will be limited resources.

“...the task is always that of managing a tiny envelope in an ocean of high demand and huge expectations,” Biti said.

He noted that dwindling national revenues will exacerbate pressure on the post-election budget.

“With accrued arrears of over $300 million and other unbudgeted for expenditure such as the $150 million Zambia maize loan scheme and the recent debt accrued in respect of the $160 million government agriculture input scheme, it is Armageddon,” Biti said.

This comes as the Zimbabwe Revenue Authority (Zimra) recently announced that it missed revenue collection targets in the third quarter, collecting $897,3 million against an anticipated $904,9 million.

Biti — who is also the opposition Movement for Democratic Change’s shadow Finance minister — said it was imperative for government to secure financial support.

“The assumption that China or South Asia will provide resources is one that will be tested and its naivety proven,” Biti said.

“It is therefore easily foreseeable that the Zimbabwean dollar has to be brought back to allow monetisation of the humongous obligations and election promises made.”

Independent economist Christopher Mugaga said the impact of delaying presentation of the 2014 national budget was “very limited because not much is expected in terms of substance given the already depressed revenue inflows after adverse outcome from revenue targets.”

“It will not necessarily affect economic growth. After all, these funds (for the budget) are to be used effectively next year,” he said.

Mugaga pointed out that announcing “a depressed and disappointing budget was going to affect the economy more than the expectations of what the budget will be like.”

“Literally, there is nothing to announce, government needs funds which are not there,” Mugaga said.

“I am sure the whole budget envelope will not exceed $3 billion. The minister cannot throw himself into the same dungeon his party was criticising Biti for, so he believes delaying tactics will bring a modicum of decency and difference to Biti’s last three budget statements.

Unfortunately, the economy cannot be tricked.”

Last year, the economy grew by 4,4 percent and this year’s growth has been downgraded from 5 percent to 3,4 percent as a result of declining metal prices and drought.

In its 2014 outlook, the World Bank forecast Zimbabwe’s growth to be around 3 percent this year with little prospects for recovery in 2014.

“The economy faces uncertainty both from expected volatility in the global economy, and on the domestic front after July elections, amidst worsening macroeconomic indicators and increased vulnerability of the banking sector,” the World Bank statement said.

As Zimbabwe’s external position has been supported by substantial short-term capital inflows, the situation would be compounded by the risk of capital outflows from emerging markets, as the United States Federal Reserve progressively unwinds its expansionary monetary policy.

“Growth performance has been stymied by continued slowdown of the key sectors of the economy, amidst easing of international commodity prices, low investment, tight credit conditions, and policy uncertainty after the July elections,” the bank said.

A fortnight ago, Zimbabwe narrowly missed its third-quarter budget revenue targets as economic growth slowed and mineral royalties fell, underlining the tough task that Chinamasa faces to lift the economy.

The Zimbabwe Revenue Authority (Zimra) collected $897 million between July and September against a target of $905 million.

“The national tax collector said many companies were scaling down operations or were totally shutting down.

“The economy continued to face challenges such as erratic power supplies, liquidity constraints and depressed industrial capacity, among other challenges,” Sternford Moyo, the Zimra chairman said.

Comments (20)

Saka mahwani chaiwo !! God help us....

samuel swiswa - 7 November 2013

Muchamama,at least that will tell you that stealing from someone and for that matter elections which Dr Richard Morgan Tsvangirai won is a curse.Look you are now pondering and clueless like a cornered cat,shame.

josefa chinotimba - 7 November 2013

As Zimbabwean we always find a way out this

BEN - 7 November 2013

As Zimbabweans we always find a way out this

BEN - 7 November 2013

The truth is that Zanu PF must swallow their prode and do the right things. Austerity measures should be taken that do away with the ususal populist rhetoric and unnnecessary bravado. We need the West to extricate us from this mercy. Now Chinamasa knows why Biti was the best finance minister last year. Its no easy task to be The Minister of No Finance!

fatso - 7 November 2013

zvichanaka chete

kenzo - 7 November 2013

Mahwan chaiwo! They did say, you can rig the elections but you can't rig the economy! God help us.

Peter - 7 November 2013

FATHER GOD WE COME AGAINST THE WORKS OF THE EVIL ONE. ZIMBABWE ITS TIME TO LIVE AGAIN WE WILL OVERCOME. AMEN

vhavho - 7 November 2013

my fears are that am forseeing the zim dollar coming soon beacause right now the gvnt has little room to manouvre and yet it needs to deliver what it promised the masses. By bringing back the zim dollar it can deal with the liquidity crisis but this will be at the expense of hyper inflation again

TRUST - 7 November 2013

ACCA video lectures 0772104011

Bambo - 7 November 2013

The country now has a cancer as well. tick tok the end is nigh. Thanks NIKUV for teaching these guys a bitter lesson. THOU SHALL NOT STEAL AN ELECTION!

Cancer - 7 November 2013

Many people would have noticed that there has been an increase in "sanctions" related stories in the state media or pro government media since the end of GNU. This seems to be well calculated to prepare the nation psychologically for impending economic disaster. After 33 years in government, Zanu Pf know they lack the willpower to make the country succeed economically. The brains are all around us but there is no commitment, with many of them busy consolidating their power until the next elections or adding more pockets to their trousers and jackets to fill up with loot. What a shame!!

Mahumbwe - 7 November 2013

Zvakanetsa. bt vanhu vajkahwina toda chingwa patafura tongai tione

Zuze - 7 November 2013

Zanu PF will make everything happen its a God given party .It follows wat God wants it to do .Its a dream to those who still think that westerners are best on this issue of budget ,shame shame shame

alphy - 8 November 2013

tongaizve tione,kkkkkkkkkkk

lavhu - 8 November 2013

There is ONLY ONE way the west can help zimbabwe and zanu. This is by being honesty, have elections that are free, fair and credible and embrased by ALL, but we ALL no that zani will not win that election so where do they go and how do they do it??? Vamama. Isu turi vaMorgen.

fengu - 8 November 2013

its time for pple to give statements of hope and support infact we all know that we have the challenge even those who are saying tongai tione you are part and parcel of this country it will affect you saka hapana wekusvotesa apa.mirirai zve muone kuti hapana chonobuda here do not plan to abort the baby before you concieve

maths - 8 November 2013

The budget, the budget! It is true that the minister might be groping in the dark. Equally, he has virtually no budget to announce as the tax base continues to be decimated. But more importantly, government size is one thing that we have failed to deal with over the past 30 years. We think a big government is the same thing as delivering economic development. Rather it spreads resources amongst many competing ministerial agendas with the evident result of no effect. A discursive approach to budget formulation is not bad, but the purpose should be to identify the limiting factors and concentrate on those. The ZANU PF manifesto itself was all over the place. A sure sign that there party has no clue of where to start to restore the economy. The ZIM Asset does seem to lack the same vision. How much more can the budget, that has to be informed by those frameworks do? So was it a lie that these guys were diverting diamond revenues? Because if they were doing, I expected them to put up a plan for quite quickly. May be they were diverting into personal coffers such that the funds are not available for sprucing up the face of the party's policy agenda. We are really stuck in the miry clay!

Mar Ire Commons - 9 November 2013

I like the comment, 'You can rig an election but not the economy!' Zanu Pf yazvionera pamhuno sefodya, hakusi kuhotsira ikoko!

Jambanja paSalisbury - 10 November 2013

There is no crisis.In Chineese language there is no word for crisis.The word instead is opportunity.Its the time to introspect and come out better from this opportunity.Food for thought. Japanese always come out better from disasters.World war 1 was an opportunity for technological advancement.Land invasions brought opportunities.Zim dollar era brought opportunities see how many people have cars now.Behind every situation there is opportunity.If you want to be negative you remain stuck in a hole,your mind says there is no way out yet there is a way.

Onesimus - 13 November 2013

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