Fuel price hike looms

HARARE - Long-suffering Zimbabweans must brace for a fuel price hike after Finance minister Mthuli Ncube increased excise duty on diesel and petrol yesterday by seven cents and 6,5 cents per litre respectively — with effect from December 1, 2018.

This comes as the country is presently battling fuel shortages which have seen petrol peaking at $1,47 per litre while diesel has breached the $1,35 mark.

Traditionally, fuel price increases have had a ripple effect, leading to price increases of essential consumer goods — denting Zimbabwe’s economic growth prospects.

In his maiden national budget, the Treasury boss also announced that the country was to start charging customs duty on motor vehicles and other selected goods in foreign currency with effect from today, following a massive influx of second-hand vehicles, mostly from Japan.

Maintaining that Zimbabwe would uphold its multi-currency system, with the United States dollar as a reference currency, Ncube also doled out a 13th cheque to the country’s civil service while slapping all senior civil servants — the Presidium included — with a five percent cut on basic salary, to be effected in January next year.

“This is also extended to basic salaries of those in designated posts in State-Owned Enterprises (CEOs, executive directors and equivalent grades), including constitutional commissions and grant-aided institutions.

“Accordingly, government has taken the position that bonus be payable for 2018, with commitment that these payments be processed before year end,” Ncube said, while presenting his 2019 National Budget, adding this year’s bonus — $174,6 million — will be restricted to the basic salary only.

In the wake of pressing foreign exchange shortages under the stewardship of the central bank, the Treasury chief announced that steps were being taken to establish a Foreign Currency Allocation Committee to promote efficient management of the country’s export receipts.

After inflation rose by 15,46 percentage points to reach 20,85 percent last month, the Treasury boss did not give a 2019 projection figure, a move analysts said was evident that government was failing to find a lasting solution to contain inflation.

As at end of August 2018, public debt stood at $17,69 billion, of which domestic debt accounted for 54 percent up from 49 percent, while external debt moved down from 51 percent to 46 percent, with the minister estimating that by end of 2018, the public debt statutory limit of 70 percent was likely to be breached.

Additionally, Ncube slashed the 2019 growth projection to 3,1 percent — lower than the 2018 expected growth of 4 percent — reflecting the impact of unfavourable weather on agriculture and macro-fiscal vulnerabilities from previous unsustainable fiscal and current account deficits.

He said with nominal gross domestic product (GDP) projected at $31,6 billion in 2019, the economy could generate revenues amounting to $6,6 billion for 2019, including retentions ($400 million), taxes ($6,037 billion), and non-tax ($162 million).

“Expenditures are projected at $8,2 billion, out of which capital expenditures are estimated at $2,018 billion, leaving a balance of $6,1 billion for current expenditures. Consequently, a deficit of $1,6 billion or five percent of GDP is projected, in line with a sustainable financing capacity of the domestic market,” the former African Development Bank vice president said.

Ncube is also targeting to cut budget deficit to single digit figure, targeting five percent of GDP for 2019 and 4,1 percent in 2020, and to three percent in 2021.

Going forward, Treasury Bills — whose issuance has resulted in the flooding of government securities into the market, posing risks to macro-economic stability as a result of money supply growth — will only be confined to the traditional role of mobilising resources to finance the budgeted financing gap, with such issuances triggered by a formal Note from the Accountant General, with the instruments only issued through an auction system.

Government will also revive the issuance of bonds, through the development of a secondary bond market with effect from 2019, as well as explore the possibility of listing such bonds on the stock market.

“Accordingly, government is reducing recourse to central bank lending from the 20 percent of previous year’s revenues statutory limit, to a maximum of five percent confined for purposes of smoothening cash flow mismatches,” Ncube said.

To weed out ghost workers in the civil service, Ncube proposed to introduce a biometric registration of all civil servants, with effect from January 1, 2019 and hinted at plans to cut Zimbabwe’s diplomatic presence at the 46 Embassies and Consulates the country is represented.

The Treasury boss also retired the country’s 2 917 youth officers by end of December 2018.

In a raft of tax relief measures, Ncube announced a review of the tax-free threshold from $300 to $350 and further widened the tax bands from $351 to $20 000, above which income is taxed at the highest marginal tax rate of 45 percent, down from 50 percent.

Further exemptions from the two cent Intermediated Money Transfer Tax are also expected in January next year with the minister suspending customs duty and exempting sanitary wear products from Value Added Tax for a period of 12 months.

Ncube also suspended customs duty on selected goods used by the physically-challenged persons while redirecting five percent of Third Party Insurance Cover to an Accident Compensation Fund as all government ministries and departments were directed to remit all revenue collected into the Consolidated Revenue Fund by end of day today.

He gave the peace and security cluster — made up of the Defence and Home Affairs ministries — a cumulative $1,064 billion while the ministry of Primary Education got $1,13 billion.

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