EDITORIAL COMMENT: Minister Chinamasa to walk tightrope Minister Chinamasa
Minister Chinamasa

Minister Chinamasa

The entire nation awaits with bated breath, the announcement of the 2015 National Budget Statement, which Finance Minister Patrick Chinamasa has the unenviable task of presenting in Parliament today.

It is a difficult call indeed, by all measures, but today’s National Budget Statement should pronounce the direction the economy will take and show the confidence Government has in its own policies. Minister Chinamasa has to balance the meagre resources at his disposal against listless competing needs, some so important the Finance Minister simply cannot afford to ignore.

Revenue inflows have continued to dwindle due to the difficult macro-economic environment and companies have either, scaled down or shut down, while viability constraints mean even less tax income.

Yet the minister will need to strike a balance between the ever growing obligations against declining revenue, which has seen Treasury consistently register deficits for the good part of this year.

At a time industrial capacity is falling, reported by the Confederation of Zimbabwe Industries at 33 percent in 2014 from 36 percent last year, analysts expect Government to act on calls to reduce tax burdens.

The already stretched working class will also be looking to the Finance minister to put a few more dollars in their pockets, especially as most firms might not afford to pay bonuses this year.

While the minister must have clear cut strategies on how he can raise the much needed funds to support national obligations, he must avoid measures that kill the goose that lays the golden egg.

It is a catch 22 situation for the minister because a close look at calls being made by both corporates and individuals show that their grievances are not divorced from realities on the ground.

Industrial capacity has fallen due to widespread macroeconomic difficulties, affecting consumer demand due to low disposable incomes. This was worsened by the closure of companies over the years. Granted, there is no immediate escape to the reality that Government is running an unsustainable wage bill, which has seen over 93 percent of expenditure going to recurrent activities.

But the minister is expected today to announce a Budget that addresses the need to increase investment in capital formation, the centre pivot of any sustainable economic growth and development.

Minister Chinamasa will today be expected pronounce measures and initiatives that will arrest job losses in industry, enhance viability of companies, improve the liquidity crisis and confidence in the economy.

Companies face a myriad of challenges, including labour law rigidities constraining efforts to realign, shortage and high cost of funding preventing retooling and recapitalisation to enhance efficiencies. This adds to other problems such as high cost of energy, utilities, cost and availability of raw materials and competition from lower priced imported goods, largely from China and South Africa.

The country faces a suffocating liquidity crisis due to the suspension of the Zimbabwe dollar at the height of economic instability in 2008, therefore, it cannot print money to improve liquidity.

This has created further problems in that it has incapacitated the Reserve Bank to be able undertake its lender of last resort function or influence money supply in an economy using a basket of currencies. This comes against the backdrop that Zimbabwe has been receiving negligible foreign investment due to negative publicity spawned as part of the West’s opposition to the land reform, and indigenisation and economic empowerment programmes. This and failure to service old public loans also shut the doors to external lines of credit.

Difficulties in the economy have also constrained companies and individuals’ ability to service loans, spawning hundreds of millions of non-performing loans, further limiting banks’ capacity to lend.

The sum of these challenges has affected the viability of companies and confidence in the economy, which calls for effective measures to address each of the teething problems.

Minister Chinamasa will also be expected to make pronouncements that address concerns on policy predictability, clarity and consistency, which seemingly unnerved investors and held back FDI.

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