2018 National Budget: Govt charts new path

HARARE - Government is taking steps towards ending its economic isolation in its first budget since the end of Robert Mugabe’s 37-year authoritarian rule with Treasury announcing a package of measures aimed at wooing international investors, including new curbs on laws that require firms to be 51 percent locally owned.

Finance minister Patrick Chinamasa said privatisation of some State firms was being considered.

In his 2018 national budget presented yesterday, he unveiled spending cuts including the closure of some diplomatic missions.

Chinamasa also said all civil servants over the age of 65 would have to retire as the government aims for a 2018 budget deficit of below four percent of gross domestic product.

At present, more than 90 percent of government expenditure goes to pay civil servants’ salaries.

Since taking office last week, President Emmerson Mnangagwa has pledged to crack down on corruption.

He has also offered a three-month amnesty for individuals and companies to surrender public funds illegally stashed abroad.

The Indigenisation and Economic Empowerment Act, which aimed to place 51 percent of companies into the hands of black Zimbabweans, was brought in by Mugabe in 2009.

But in Thursday’s budget announcement, Chinamasa said the law would apply only to the platinum and diamond sectors from now on.

At the same time, export taxes on processed platinum would be deferred until 2019.

Former Reserve Bank of Zimbabwe governor Gideon Gono described the national budget as “comprehensive under the circumstances, practical, bold, courageous, forward-looking, investment stimulating, confidence boosting and painfully sweet.”

He said Chinamasa’s budget was arguably one of the best in years, if only it can be translated into action.

“I have already spoken to and congratulated the minister, Cde Patrick Chinamasa, and implored him to now focus on the implementation matrix, advice which he sincerely appreciated.

“From the Special Economic Zones (SEZ) point of view, we are ready to fly as soon as the twin issues of the chief executive officer and the secretariat have been attended to,” said Gono, who is the chairman of the SEZ.

Chinamasa said total revenue collections for 2018 are estimated at $5,071 billion and expenditure for the year is estimated at $5,743 billion, bringing up a deficit of $672 million.

The $5,7 billion budget is $1,6 billion more than last year’s $4,1 billion.

“The budget deficit for 2018, given total revenues available for appropriation by Parliament of $5,071 billion, and total expenditure and net lending of $5,743 billion, translate to a fiscal deficit of $672 million,” he said.

The wage bill for 2018 is set at $3,3 billion, representing 57 percent of the total budget - down from 73 percent in 2017.

“The 2018 budget is appropriating $3,3 billion for employment costs, with $2,6 billion being set aside for the Public Service wage bill, inclusive of grant aided institutions,” he said.

The minister confirmed civil servants bonuses for 2017.

The minister acknowledged the inflationary pressure endemic in the economy pointing out that inflation was being driven by the discounts on real time gross settlement system, otherwise known as the RTGS.

“In the outlook, the biggest threat emanates from inflationary pressures that the economy faces from potential general price hikes driven by speculative tendencies, arising from the mis-match between electronic bank balances and available foreign exchange.”

Gross Domestic Product growth is estimated at 4,5 percent in 2018, up 0,8 percent from 3,7 percent in 2017. – Additional reporting by BBC