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THE 2025 National Budget presented yesterday by the Minister of Finance, Economic Development and Investment Promotion, Professor Mthuli Ncube, once again shows the determination of the Second Republic to provide essential services needed by the people, push economic development and enforce tight fiscal and monetary discipline.

This has required some very careful balancing to ensure that what is needed can be paid for almost entirely out of what the Government receives, with a budget deficit of just three percent that funds a small fraction of the capital development budget, that part that under the Second Republic rules is producing a stream of income as what is funded is commissioned.

The Minister also made some serious proposals to enhance his revenue, not so much with new taxes but by a number of interventions to ensure that far more of those in the informal sector, and even those in the formal sector who dodge taxes they should be paying, are contributing at least something to the national pool.

Many of those tax collections will be small, because they come from small businesses, but combined they should give him a bit extra to spend on schools, hospitals, social relief and other needs.

So far as taxes most people pay, Prof Ncube made almost no change except to make sure his tax brackets, which were set in United States dollars a while ago, reflect a realistic exchange rate. He chose ZiG28:US$1 for the reset, so income below ZiG2 800 a month is tax free and anything above ZiG84 000 is at 40 percent.

Bonuses tax concessions presumably use the same formula.

He did exempt liquid petroleum gas from VAT, noting that a large majority of people now rely on gas for cooking and heating and that gas is a lot less harmful to the environment than using firewood or similar fuels.

There were a couple of business tax breaks. Duty on pure electric vehicles was cut from 40 percent to 25 percent as a Zimbabwean contribution to the needed switch over from petroleum fuels, and complete knocked down vehicle kits are now exempt from duty.

The one tax he added that might affect some is the fast food tax of 0,5 percent, a health measure, but this only applies to largely fried or similar foods, such as chips, burgers and chicken, and does not apply to what the average conservative grandmother would consider a healthy and sound meal. In that regard, sadza and meat or spaghetti bolognaise and the like are not hit by the extra tax.

In his spending, the Treasury chief noted that the compensation bill for State workers, both civil and uniformed, had risen to 56 percent of spending, above the 50 percent threshold. So he was keen to make sure all who should be paying tax were paying tax, had little room to manoeuvre over tax concessions, and for other reasons was not really able to increase taxes.

While the economy was expected to grow six percent next year on the back of a surge in agricultural output with a La Nina normal rainfall season, the Budget still has to take into account continuing costs of the El Nino season of this year. For example, the extra food relief and cash payments until the next harvest is in, will still be required for the first few months of next year.

The BEAM programme is being extended again as the Government continues to ensure that every child can attend school, regardless of what their parents or guardians earn, and the social services to the most vulnerable are at least being maintained. Some of the gains made in coping with the drought will become part of the permanent service list.

Much of the budgeted spending is social in nature. On the list of what each ministry is allocated, Primary and Secondary Education as usual tops the list with ZiG46,6 billion (almost US$1,3 billion) and once Higher Education is included, the total education and related services budget exceeds ZiG56 billion.

Health and Child Care comes in second with ZiG28,3 billion, and this is 13 percent of all spending, with Zimbabwe now very close to the African target of 15 percent as it continues to upgrade health services and looks at more local production of medication and other health products.

With the increasing complexity of private services, the Minister wants legislative changes to allow advertising in this sector so people can actually compare costs easily. He felt the old-fashioned ban on medical advertising was no longer useful.

Lands, Agriculture, Fisheries, Water and Rural Development comes in third with almost ZiG23 billion. This includes the significant sums for the Presidential input schemes, designed to lift the rural population out of grinding poverty by giving them opportunities to earn money if they are prepared to work hard, plus the significant sums that must be spent on dams and irrigation development to climate-proof farming.

Defence and Home Affairs and Cultural Heritage come in fourth and fifth. Home Affairs is largely the police and that extensive network of registration offices.

Prof Ncube noted that the potential risks in the region still required a reasonable defence budget, although the increasing “smartness” of the defence establishment and its technical back-up would see more of that technical support available for other Government programmes, allowing a double benefit from some of the budget.

The Minister was also keen to see more local input in areas that had been the preserve of outsiders. He wants more local ICT solutions used, and wants centralised procurement for State ICT products and services. That would ensure that everyone’s systems can be linked when necessary, and that the sort of purchase problem that saw grossly overpriced equipment being ordered, although the orders were cancelled, being a thing of the past.

Generally, as we have come to expect, the Budget is a workmanlike set of proposals that should attract the required support in Parliament. The Minister has been responsible, made sure that essential services are funded, put together a reasonable capital budget, which includes a larger devolution budget, and has stressed the need for fiscal discipline and other programmes to provide a stable currency and a low-inflation economy, so the gains are maximised and economic growth can be sustained.

The success of this approach was seen this year with the two percent predicted growth being achieved, despite the worst drought for decades and falling prices for non-gold minerals. An economy which can expand in extreme conditions is robust and so can hit that six percent in the reasonable conditions expected this year, with the Government through its budget supporting the private sector and making sure everyone wins.