Mid-term 2022 budget review expected end of July
Senior Business Reporter
FINANCE and Economic Development Professor Mthuli Ncube is expected to present the 2022 mid-term fiscal policy statement at the end of next month with the Treasury still assessing the possibility of the need for a supplementary budget.
Economic analysts are on record saying a supplementary budget is inevitable and taking into account the fact inflation has risen to 191,4 percent this month from 131,7 percent, the $927,3 billion budget Prof Ncube presented last November has been eroded.
The analysts contend that the supplementary budget should be twice the 2022 national budget, taking into account that the local currency has depreciated to over $600/US$1 from $220/US$1 at the start of the year, hence the budgeted amount was no longer sufficient.
Addressing journalists during a press conference in Harare on Monday, the Treasury chief said the Government had doubled salaries for civil servants and those in the security sector, the legislature, the judiciary and grant-aided institutions and independent commissions effective July 1 2022.
The benefits also include the implementation of non-monetary benefits.
Responding to questions from the media as to whether the incentives will not result in the Government coming up with a supplementary budget, Prof Ncube said before coming up with a supplementary budget, the Treasury would rather have assurances on the revenues first.
“So far, in terms of our assessment these increases are within the current budget. We are assessing whether we need a supplementary budget or not.
“But remember a supplementary budget also relies on additional revenues because we have to live within our means.
“So, we would rather have the revenues first and be able to spend those revenues and we have to request Parliament to allow us to spend those revenues,” he said.
In the 2022 national budget, the economy was expected to register a 5,5 percent trajectory, but according to initial estimates, Prof Ncube said, could be slightly reduced on the back of the prevailing economic climate.
Bulawayo-based economic analyst Mr Morris Mpala said given the prevailing economic climate, it was critical for Prof Ncube to come up with a supplementary budget.
“On the back of the inflationary pressures that we are seeing, there is a humongous need for the minister to come up with a supplementary budget to also help the Government to sustain the infrastructural development projects.
“In the upcoming fiscal policy, he also needs to pay attention to reviewing upwards the tax-free threshold so that consumers have more disposable incomes,” he said.
“Given that inflation rate is just under 200 percent, we are looking at inflation closing the year at 500 percent by year end in terms of economic growth rate projection.
“There is no growth to talk about this year on account of the ravaging inflation that has been exacerbated by the Russia-Ukraine war and the Covid-19 pandemic which is still within our midst.
Mr Mpala said the rising cost of food and fuel was likely to affect the growth of the mining industry and as such that sector was likely to register a trajectory under two percent.
In a separate interview, Dr Reneth Mano said there were a lot of expectations that the minister should attend, adding that a supplementary budget was not inevitable.
“From the agriculture side, Zimbabwe is expected to import 850 000 tonnes of grain and we don’t see that happening unless and until there is proper coordination by the Government. The Minister himself must sink his teeth into this matter and ensure that resources are available to import the grain which will also be used to improve food sufficiency for both humans and production of stock feed,” he said.
In the national budget, Dr Mano said Prof Ncube should also set a budget for the importation of fertiliser to boost agricultural output in the next season.
“Zimbabwe has strong relations with countries such as China, so there is a need for the minister to set aside a budget specifically for the importation of fertiliser to boost output in the next agricultural season, therefore it is critical to come up with a supplementary budget to finance such projects.”
Another Bulawayo-based economic analyst, Ms Sharon Mpofu echoed similar sentiments adding that she sees this year’s economic growth not exceeding 3 percent as has already been predicted by the World Bank.
“In light of the inflationary pressures that we are experiencing, I don’t think this year’s economic growth rate will exceed the 3,5 percent that the World Bank has predicted.
“A supplementary budget is certainly needed in the mid-term fiscal policy statement considering that the annual rate of inflation in June increased to 191 percent from 131 percent and that the issues that civil servants raised were not taken into account when the 2022 national budget was presented in November last year,” she said.
Like the rest of the global economies, Zimbabwe has not been spurred from the impact of the Russia-Ukraine war taking into account that the two warring Eastern Europe nations supply almost 70 percent of the world fuel requirements and grain. Due to the Russia-Ukraine war, inflationary pressures around the world have been rising remarkably due to limited supply of fuel and grain across the world.
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“I have the growth forecast figures for 2022 but as per tradition we will announce that formal revision during the mid-term budget review on the 28th of July. May be suffice to say for now that we will announce a slightly lower growth rate than the 5,5 percent.
“There is uncertainty everywhere in the global economy and we are part of the global economy. The global economy is facing challenges around inflation control, in fact around the three Fs, that is food, fuel and fertiliser.”
“So, there is a challenge around that, Zimbabwe is not different, some of these measures are really designed to tackle those issues,” said Prof Ncube.
Meanwhile, the Treasury secretary Mr George Guvamatanga responding to questions from the same occasion said the Government does not have an appetite for foreign currency.
“We (Government) do not go into the market to seek foreign currency, we have actually been the suppliers of foreign currency into the market by paying some of the contractors and some of our requirements directly in foreign currency.
“And also as the minister has indicated supporting the auction, the corporate the corporate of this world as l indicated earlier with very cheap forex for a very long period of time as Government. So, we are not the ones that have created excessive demand of foreign currency in the market, it’s definitely not the Government,” he said.
The excessive demand and speculative tendencies in the foreign currency market have resulted in the weakening of the Zimbabwe dollar especially on the parallel market, including malpractices by some contractors who were awarded major Government projects that are turning to the parallel market to convert their local currency payments to hard currency.
Last month, Prof Ncube announced that the Government was now paying contractors for major infrastructure projects half in US dollars and half in Zimabwe dollars.
Under this model, local currency payments to the contractors have been staggered to avert the temptation to try and convert a solid local currency payment on the black market.