‘2023 mid term budget must entrench stability’

THE 2023 mid-term fiscal budget provides authorities an opportunity to introduce measures to reduce inflation and drive strong economic growth, economic analysts have said.

In addition, it is also expected that measures would be implemented to reduce Zimbabwe’s external debt which presently stands at US$17,5 billion.

Traditionally the mid-term budget is presented between July and August.

The Government had projected an annual blended inflation target of between 10 and 30 percent by the end of the year.

Zimbabwe’s annual blended inflation rate for June was 175,8 percent, gaining 89,2 percentage points from the May 2023 rate of 86,5 percent

The World Bank has projected that Zimbabwe’s economy would grow by 2,9 percent in 2023 at a time the global average growth is expected to slow down to 2,1 percent this year.

Zimbabwe’s economy grew by 3,4 percent in 2022.

The 2023 fiscal policy will come at a time the economy has been experiencing growing stability, following the cocktail of interventions by fiscal and monetary authorities, which have steadied the exchange rate and stopped inflation in its tracks.

But workers will hope the mid-term budget review, whose dates are yet to be proclaimed, will review tax thresholds given the impact of inflation, which has put most people into higher tax bands.

An economic commentator Mr George Nhepera said: “The fiscal policy statement once again gives the minister of finance the opportunity to articulate new policies towards reducing inflation by half by end of 2023; grow the economy to significant levels and reduce external debt to the international community of creditors.”

In its Global Economic Prospects report, the World Bank said global growth had slowed sharply and the risk of financial stress in emerging markets and developing economies was intensifying on the back of elevated global interest rates

Finance and Economic Development Minister Professor Mthuli Ncube has shifted his earlier economic projection of 3,8 percent to six percent citing improved agricultural performance and increased electricity availability.

The Government expects to harvest 2,3 million tonnes of maize this year, a 58 percent increase from the previous season, due to favourable rainfall received across the country.

“In line with our policy of establishing a private sector-led economy, the Government should identify any taxes to reduce that have capacity to incentivise our private sector which in my view is an engine of sustained economic growth, employment creation and stability in our country.

“The ongoing fiscal prudence which we have seen so far in the first half of the year should continue under a tight and conservative monetary policy so as to reinvigorate our economic growth and score tangible achievement of our Vision 2030 developmental goals,” said Mr Nhepera.

“Our economy has the capacity to remain resilient despite the worst inflation period and exchange rate loss we have endured, due to our partial dollarisation strategy under the multiple currency system.

“The Government should continue with this noble policy especially as it rewards and pays its civil service in both US dollar and local currency wages and salaries.”

Mr Nhepera said it is time for Prof Ncube to officially recognise the US dollar allowance as a salary across all grades in public service and index a portion in hard currency and be payable in local currency at prevailing interbank rate.

“This will effectively close the constant pressure to negotiate new salary packages for Government employees and reduce unnecessary pressure on the exchange rate,” he said.

In a separate interview, Bulawayo-based economic commentator Ms Wendy Mpofu echoed similar sentiments, adding that the country needs to restore confidence levels in the financial services sector to strengthen local currency.

“In the upcoming mid-term budget, authorities need to craft policies that foster strong economic growth while reducing inflationary pressures, this can only be done if authorities continue to tackle the challenges bedeviling the economy head-on,” she said

A financial market analyst, Mr Grey Munetsi said the market needs reassurance that the Treasury will continue to implement policies that support the United States dollar.

“It is important for the Minister (Prof Ncube) to address the questions around the management of forex. There is uncertainty around the funding of the auction, issues around alleged backlogs in the payment of Government suppliers and export proceeds retention.

“The minister must reassure the market by clearly addressing how these payments will be supported and the effect on the money supply situation because the market is nervous about the sustainability of the Zimbabwe dollar exchange rate,” he said.-herald