‘Budget review should address measures to create demand for ZiG’

ECONOMIC commentators have suggested that the much-awaited Mid-Term Budget and Economic Review covering the first half of the year should, among other issues, address temporary changes to the tax system to generate additional revenue to cater for drought impact and enact policies that increase demand for ZiG and enhance its stability.

A mid-term budget and economic review to be presented by Finance, Economic Development and Investment Promotion Minister, Professor Mthuli Ncube, is an evaluation carried out at the midpoint of a country’s fiscal year.

It aims to assess the performance of the national budget against the initial forecasts. The process involves analysing revenue collection and expenditures across various programs.

Added to that, it evaluates the overall economic health by examining factors such as GDP growth, inflation rates, unemployment levels and the impact of global commodity prices.

Depending on the findings, the Government may alter its budget by updating revenue or expenditure projections to align with the evolving economic landscape.

The review also serves to pinpoint areas where economic policies might require adjustments, including modifications to tax rates, interest rates, or social spending initiatives to meet new economic challenges.

Weighing in on his expectations, National University of Science and Technology (Nust) Department of Banking and Investment Promotion economist, Mr Stevenson Dlamini told Business Chronicle that the Government could redirect resources towards drought expenditure to mitigate the effects of El Niño-induced drought.

Zimbabwe and other countries in southern Africa have been hit by the El Nino-induced drought that has wreaked havoc on the country’s agriculture sector, decimating crops and depleting water sources and leaving millions of people in need of food aid.

In the face of such dire circumstances, President Mnangagwa has declared the 2023/2024 agricultural season a State of National Disaster following the El-Nino-induced subdued rainfall pattern, which resulted in food deficit in many areas leaving most families in need of food aid.

“On taxes, I expect that the Government may consider implementing temporary changes to the tax system to generate additional revenue for addressing the impacts of the drought. This could involve increasing taxes on certain goods or sectors, or introducing new taxes specifically aimed at funding relief efforts,” said Mr Dlamini.

To allocate funds towards addressing the effects of the El Niño drought, the Government may propose a supplementary budget, he noted.

“This would involve re-allocating resources from the existing budget. I do not foresee any supplementary budget through increased expenditure or borrowing,” he said.
Mr Dlamini added that given the socio-economic impact of the drought on vulnerable populations, the Government may prioritise the enhancement of social security nets.

These include programs such as cash transfers and food assistance targeted at those most affected by the drought, he said.
Economic analyst, Mr George Nhepera said he looks forward to the mid-term budget review complementing the monetary policy in coming up with measures to create demand for ZiG through taxes leading to the currency’s stability.

“In recent weeks, we have seen the black market rate sliding to ZiG 21 , due largely to such lack of support. While the central bank has done its best to back the currency with gold and other precious minerals and link the currency determination to the price of gold, it needs the Ministry of Finance to ‘walk it’s talk’ in supporting the currency,” he said.

“To us, the two noble policies in our country, the National Budget and monetary policies are “ two legs” which should move together in terms of common objectives and fundamental thinking designed to move our country forward.
“Their roles should remain iron-clad in being complementary,” said Mr Nhepera.

He added that concrete safeguards against corruption should be put in place so that money collected as taxes is appropriately used and accounted for.

“This will instil public confidence in the management of funds. We welcome the centralised internal audit structure that has been put in place by the ministry to provide an independent check on internal controls within the Government.”-chroncile