eBusiness Weekly
Note from ZNCC
As the Zimbabwe National Chamber of Commerce (ZNCC), we appreciate the continued acknowledgment and consideration of our policy submissions by both fiscal and monetary authorities.
This is testimony to the mutual relations that exist between the chamber and our policymakers. The Minister of Finance, Economic Development, and Investment Promotion, Honourable Professor Mthuli Ncube, presented the 2024 National Budget on November 30, 2023.
The chamber takes this opportunity to analyse and review the newly proposed measures to raise revenue, tax relief and legislative amendments.
This follows the 2024 National Budget Submissions which the chamber presented to the Ministry of Finance, Economic Development and Investment Promotion, Parliamentary Portfolio Committee on Budget, Finance and Investment Promotion, and the Parliamentary Portfolio Committee on Industry and Commerce in October 2023.
Overview of the 2024 National Budget Statement
The 2024 National Budget Statement was delivered at the New Parliament Building under the theme: “Consolidating Economic Transformation”.
The Government seeks to maintain tight fiscal and monetary policies to ensure coherence among macroeconomic policies and attain sustainable macroeconomic stability and growth trajectory.
Also, the aim is to deepen and implement reforms that will ensure progress towards the attainment of Vision 2030. The focus of the 2024 National Budget revolves around the following:
Macroeconomic stabilisation measures that entrench price and currency stability;
Structural reforms aimed at improving the business environment and promoting private sector-led sustainable and inclusive growth;
Facilitating structural economic transformation and promoting diversification, value addition, and domestication of value chains;
- Strengthening the capacity of public institutions and governance systems to ensure that they provide quality essential services, as well as respond to the needs of the citizens;
Effective social protection programmes that cushion vulnerable groups;
Upscaling delivery of quality public infrastructure services and security of supply for key enablers; and
Engagement and re-engagement efforts that build confidence and goodwill with external development partners, as well as resolving external debt arrears, including debt restructuring.
In its submissions to the Treasury, some of the issues that were proposed by the chamber to the Ministry of Finance, Economic Development, and Investment Promotion were taken on board.
These included the suspension of the liberalisation of basic commodities, excise on cigarettes maintained, monitoring systems on the production of cigarettes to counter illicit cigarette trade, upward review of the local currency tax-free thresholds for both PAYE and bonuses, and suspension of duty on the importation of safari and tour vehicles.
However, the rest of the proposed measures in the 2024 National Budget Statement are mainly centred on domestic resource mobilisation rather than creating a conducive environment for the private sector to flourish due to the absence of external budget support.
The risk is that the more businesses and households are taxed, the lesser will be the revenue generated.
At a glance, the proposed revenue target for 2024 amounts to $53,9 trillion (18,3 percent of GDP) against an expenditure target of $58,2 trillion (about 19,8 percent of GDP).
These values would amount to about US$10 billion (compared to US$6,96 billion for 2023) at the interbank rate of US$1/$5 796 as of December 1, 2023 or US$7,4 billion at the parallel market rate of US$1/$7 800.
In the worst-case scenario where the exchange rate is expected to continue on a rapid depreciation path, the US$/$ exchange rate may reach US$1 = $11 000 by the end of June 2024 at the interbank market.
Thus, the value of the 2024 National Budget, similar to the 2022 and 2023 scenarios, is also highly susceptible to value erosion due to exchange rate depreciation, and the expenditure value could be around US$5,2 billion, in real terms, by June 2024.
However, the scenario can be saved by the proportion of US dollar income that accrues to the Government’s coffers given that about 80 percent of transactions are in foreign currency.
Currently, as per the 2024 National Budget Statement, about 48 percent of total revenue contribution into the Consolidated Revenue Fund is in foreign currency.
Additionally, the Government is also compelled to promote the use of the local currency, and thus, taxes and duties are expected to be paid for local currency.
There is a greater need to strike a balance between the two. Accordingly, macroeconomic stabilisation measures that entrench price and currency stability should be pursued by both fiscal and monetary authorities.
In terms of the Vote Appropriations, the expenditure estimate from Government Ministries, Departments, and Agencies amounted to $110 trillion of which $58,2 trillion was approved. Therefore, this represents a lack of adequate financial resources to effectively and efficiently implement government programmes.
However, the shortfall may be understandable in that the increase of $53,7 trillion from the 2023 target expenditure of $4,5 trillion (already exceeded to $12,3 trillion as of September 2023) is largely inflationary and destabilising.
A closer look at some of the budgetary allocations to the Ministry of Health and Child Care, Ministry of Finance, Economic Development and Investment Promotion and Ministry of Industry and Commerce, among others, gives a glimpse of the fiscal policy thrust for the year 2024.
The budgetary allocation to the Ministry of Industry and Commerce entails that the funds will meet only administration expenses towards the implementation of the new Zimbabwe National Industrial Development Policy (2024-2030).
A critical issue is on the disbursements of the allocated funds to MDAs in which the Ministry of Finance, Economic Development, and Investment Promotion has been found wanting as they wait for ZIMRA to collect revenue and then disburse proportionately.
Budget allocations for a broader revival of the economy must be targeted toward capital expenditure in agriculture, manufacturing, health and tourism sectors, among others.
Some of the international protocols such as the Maputo Declaration on Agriculture and Food Security, and the International Labour Organisation (ILO) Recommendation 202 on Global Social Protection Floors have been consistently fulfilled, while the Abuja Treaty is far-fetched.
However, the rest of the proposed measures in the 2024 National Budget Statement are mainly centred on domestic resource mobilisation rather than creating a conducive environment for the private sector to flourish due to the absence of external budget support.
The risk is that the more businesses and households are taxed, the lesser will be the revenue generated.
To be continued next week
This article was prepared by the ZNCC for Business Weekly
