Confused about the economy? Want to understand the budget? Take six minutes and watch Point of View with Zororo Makamba explain Finance Minister Mthuli Ncube’s budget, including what he’s trying to do and how.
Makamba says there are three things Ncube is trying to do with the budget:
- Stop borrowing too much
Government owes Zimbabwe $9.6bn. A lot of this is in Treasury Bills. Also, Ncube has promised to reduce government’s overdraft limit from 20% of the previous year’s revenue to just 5%, and, he says, they won’t go over this limit.
- Stop spending too much
The budget says top civil servants’ salaries will be cut by 5%. This includes Ministers, Permanent Secretaries, parastatal bosses and the Presidium. This is great, says Makamba, but there’s just a few issues. We don’t actually know how much we’re saving here, because we don’t know how much these people actually earn. Also, salaries are just a fraction of what Zimbabwe spends on these officials – even better would have been to have looked at their allowances and benefits.
To reduce spending, Ncube has also promised to address the issue of ghost workers – fake entries on the civil service pay roll which the Auditor General says costs Zimbabwe $20 million/year. To further cut costs, Zimbabwe will reduce its number of embassies from 46 to 38. Currently, we spend $65 million on embassies each year, so having fewer embassies will save a bit of dosh. And more on saving, government pool/project vehicles will be required to park after hours, so they don’t rack up mileage costs. A bigger savings might be the one Ncube has announced around Command Agriculture – which cost Zimbabwe $1 billion this year.
- Raise more money
In the budget, Minister Ncube also announced a number of measures to get more money to government. This looks like more taxes. For example on fuel – the excise tax has gone up 7 cents on diesel and 6.5 cents on petrol. This means fuel prices will go up, and that will push the price of everything else up as well. Also, for companies which receive USD, they’ll be expected to pay their VAT in USD. If you’re importing a car from outside the country and you paid USD for the car, you’ll need to pay your import duty in USD. The same will apply on importing a number of other luxuries like wine, cheese and makeup. Ncube is doing all of this to try and bring USD back into the formal system, and to reduce imports. According to Makamba, Ncube is trying to drag us back into dollarisation slowly – and it is going to hurt.
In all of this, the bigger question is whether government will stick to its commitments, follow through on its promises and do what it says it will do. The budget will include a lot of austerity for ordinary people, but is there also austerity for government? Senior civil servants will be able to import cars without paying any duty at all. If we’re all doing this austerity thing, we should all be making sacrifices. Are there enough spending cuts at the top? Will government cut down on foreign travel? Will ministers cut their allowances? Will our MPs stop demanding cars? Do we even need that new Parliament built in Mt Hampden?
Watch Zororo Makamba’s Point of View here