Prosper Ndlovu, Business Editor

FINANCE and Economic Development Minister, Professor Mthuli Ncube, yesterday unveiled a ZW$10,85 billion supplementary budget and announced a string of measures to cushion workers while stimulating domestic growth and increasing revenue.

Citing the changes in the macro-economic conditions and in line with updated fiscal and monetary policy framework, he pronounced a review of the tax-free threshold from ZW$350 to ZW$700 in order to cushion taxpayers and stimulate aggregate demand for goods and services.

Presenting his Mid-Year Budget Review Statement anchored on the theme “Building a Strong Foundation for Future Prosperity”, in Parliament, Prof Ncube further proposed widening of the tax bands to a maximum of ZW$30 000, above which income is taxed at the marginal tax rate of 40 percent, with effect from 1 August 2019. This excludes employees that earn in foreign currency who shall continue to settle their tax liability in foreign currency.

Prof Ncube proposed to review the tax-free threshold from the current ZWL$10 to ZW$20 and the maximum tax payable per transaction by corporates from the current ZWL$10 000 to ZW$15 000 for transactions with value exceeding ZWL$750 000. He said the supplementary budget has been necessitated by the negative fiscal outturn experienced in the first half of the year. Despite recording positive revenue collections between January and June 2019, the minister said the country suffered from inescapable and unforeseen expenditures on both current and capital heads, arising from higher than anticipated inflation, exchange rate fluctuations, drought and the devastating Cyclone Idai.

Given the above headwinds, Prof Ncube said the revised 2019 Gross Domestic Product growth was expected to be negative but said Treasury will keep tracking key developments in the economy with a view of making appropriate adjustments to sectoral growth profiles.

“Resultantly, the Mid-Year Review provides an updated 2019 fiscal framework with projected total expenditures of ZWL$18.62 billion, against anticipated revenue collections of ZWL$14.1 billion. The projected expenditures are inclusive of a proposed supplementary budget of ZWL$10.85 billion,” said Prof Ncube.

“The supplementary expenditures being proposed are designed in a way that they are in line with increased revenues, and will be implemented without compromising fiscal discipline and upsetting set fiscal targets.”

Coming on the back of unforeseen shocks experienced in the first half of the year, the measures are aimed at buttressing the gains of the on-going economic reform agenda guided by the short term Transitional Stabilisation Programme (TSP), a major building block towards attainment of an upper middle-income economy by 2030.

Prof Ncube said the first half of 2019 was marked by a major shift in policy management by breaking from the past and focusing on action in line with the thrust on Results Based Management, which explains why Government was undertaking bold policy steps. He said full implementation of these reforms was necessary to achieve sustainable growth.

The minister took the opportunity to update the August House about the milestones achieved under the TSP between January and June this year. He said Treasury has made significant headway in containing the twin fiscal and current account deficits, which over the years instigated instability in the economy.

“The fiscal and current accounts are now balanced and under control, while the tools of monetary policy have also been activated – thus representing an essential and complete toolkit for dealing with various macro-economic challenges facing the economy,” he said.

He said during the first half of the year Government budget remained on track with revenue collections for the period generally performing above targets by an average of $139.9 million to give cumulative revenues of $4,99 billion, against a target of $4.15 billion. This gives a positive variance of 20.2 percent. 

However, total Government spending for the period stood at ZWL$4.2 billion against a target of ZWL$3.7 billion, which is ZWL$532 million over-expenditure. This was a result of inescapable and unforeseen expenditures on both current and capital heads. 

The country had to contend with unplanned expenditures covering cushioning allowances for civil servants, cost of living adjustment allowance of ZWL$400 million implemented starting from April, pension reviews, filling of critical posts at a cost of ZWL$58 million, Cyclone Idai mitigation, subsidised mass public transport, social protection and infrastructural programmes.

Prof Ncube said significant fiscal adjustments have seen the country trim its domestic debt stock, which stood at ZWL$8.8 billion as at end June 2019 down from ZWL$9.5 billion in December 2018. 

He said the recent departure from multi-currency and introduction of the local currency has not only restored monetary policy but also created scope for enhanced competitiveness of exports. Prof Ncube said proactive measures were being implemented to tame inflationary pressures, which are manifested in the visible scars of persistent price increases. 

“We are aware that inflation is caused by running of huge budget deficits, financed through monetisation which creates high money supply growth – Simple! Hence, elimination of fiscal deficits will curb money supply growth and therefore, inflation,” he said.

As such, Prof Ncube said Treasury was rebasing inflation reporting following adoption of the local currency and that as a result Zimstats will defer publication of year-on-year inflation while building up data of prices in mono-currency for a period of 12 months to February 2020.

In support of industry he extended the clothing and electrical manufacturers’ rebates, suspended duty on commercial tyres and duty on solar batteries in view of the gap in local production among other incentives. In view of the depreciating local currency, Prof Ncube said all statutory fees, levies and charges were no longer reflective of the cost of providing Government services. He proposed that these be reviewed in line with economic developments.