2018 Budget roundup: Chinamasa underscores political will for new economic order
Key highlights
- GDP growth above4.5 percent in 2018 premised on a new way forward with economic and investment recovery measures towards a ‘new economic order’.
- Tax revenue $4.3 billion
- Overall revenues for the public of US$5.533 billion.
- Expenditure framework of $5.743 billion, inclusive of retention funds.
- Current expenditure $4.5 billion
- Capital expenditure $1.2 billion
- Fiscal deficit of $672 billion
- Elections will be supported to the tune of $132.2 million
- Reduction of the share of employment costs to 70 percent 2018
HARARE- The 2018 national budget presented by Finance and Economic Planning Minister Patrick Chinamasa Thursday afternoon has underscored the importance of political will to ensure that the country’s economy moves forward. Chinamasa highlighted that corrective measures to address the apparent fiscal indiscipline have constantly been proffered, over the years, with Cabinet actually embracing a number of recommendations. He however bemoaned that the measures were “arbitrarily reversed or ignored, reflective of lack of political will”.
In his budget presentation, Chinamasa indicated that restoration of confidence in the economy, promotive of investment, production, employment creation and sustainable growth, development and poverty reduction will not be realised in such an environment. He added that the challenges facing the economy demand well thought-out and focused government interventions for a much more rapid and sustained recovery path that delivers on jobs.
“The ‘New Economic Order’, therefore, gears towards restoring discipline, fostering a stronger culture of implementation, supported by political will in dealing with the fiscal imbalances and financial sector vulnerabilities; public enterprises and local authorities reform; improving the unconducive investment environment; dealing with corruption in the economy; re-engagement with the international community; stimulating production, and exporting; as well as creation of jobs”, he said.
“Central to adherence to the above fiscal anchors will be discipline and the political will to implement the necessary measures, avoiding arbitrary reversals to agreed Cabinet policy positions that entail pain and sacrifice”, added Chinamasa.
The 2018 national budget notes that the biggest threat emanates from inflationary pressures that the economy faces from potential general price hikes driven by speculative tendencies, arising from the mismatch between electronic bank balances and available foreign exchange. On treasury bills, Chinamasa called on the central bank to put in place policy measures to sterilise the impact on the stock of money supply/RTGS balances within the economy.
“At the heart of the economy’s fundamental economic challenges is an unsustainable budget deficit, whose financing through issuance of treasury bills and recourse to the overdraft with the Reserve Bank is untenable.This is also at the core of factors driving the demand for foreign exchange, as well as creation of excess money supply, which is largely in the form of electronic RTGS and mobile money balances”, he said.
The budget also highlighted that a freeze on recruitment will be maintained across the board, save for critical posts as determined by Treasury in conjunction with Service Commissions. Government will also, with effect from January 2018, retire staff above the age of 65, which is the retirement age. Further, government will rationalise youth officers, a decision that had been reversed at a rally in Mashonaland West by Mugabe, with their duties being assumed by ward development officers. This will result in the country making annual savings of $20 million. The budget also noted that the size of government delegations for foreign business travels are amongst the highest in the region and will be moving in to trim it in order to cut costs.
Support to public entities, according to Chinamasa, will strictly be conditional on credible and bankable turnaround strategies, complemented by stringent cost containment measures. The 2018 national budget will also implement a number of supportive measures to foster a stable economic environment; including removal of policy uncertainty, and inconsistency; guaranteeing safety of investments and amendment of the Indigenisation policy. Government will also focus on lowering the cost of doing business; re-engaging with the international community; strengthening the security of land tenure and introduction of bankable land leases. Other measures that will be pursued include enhancing foreign exchange generation, including tapping into the diaspora; concrete, and time-framed public enterprises reforms; as well as dealing with corruption, rent-seeking, and other business malpractices.
“Hence, the 2018 national budget’s main objective is to, first and foremost, correct fiscal imbalances in order to build the necessary confidence and also eliminate vulnerabilities to the financial sector, that way creating a conducive environment for investment, growth and employment creation.
“Under the ‘New Economic Order’, it is imperative that government ministries and departments strictly follow borrowing procedures laid down in the Debt Management Act, in order to avoid committing the country to unsustainable and unproductive loans”, said Chinamasa.
It is projected that mineral export receipts of $2.5 billion will be realised next year, up from the $2.3 billion expected this year. Growth in the manufacturing, which is estimated at 1 percent this year, is projected at 2.1 percent in 2018, benefitting from improved agro processing value chains in foodstuffs, drinks, and ginning, also amid supportive import management measures.
Meanwhile, the national budget also noted that high levels of import dependency, relative to estimated exports of US$4.6 billion for the year 2018, imply continued foreign exchange imbalances.
“Our quest for reversing economic decline and eradicating unemployment and poverty can only become reality if we walk the talk with regard to adoption of a paradigm shift in the way we do business and manage our economy, public enterprises and finances. In this regard, the 2018 National Budget presents an opportunity to contribute to a Comprehensive and Coherent Phased Strategy for addressing the widening macro-economic imbalances”, said Chinamasa.
Source: Financial Express
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