By Tendai Biti
Finance minister Mthuli Ncube on Thursday presented his 2022 Mid-Term Review and Budget Statement. It was painful to indulge in an hour of a pointless, tired monologue. An absolute damp squib.
A huge opportunity was missed to address fundamental disequilibrium in the economy centred around seven key issues that are: hyperinflation; exchange rate collapse; collapse in public sector wages; collapse of the social sector; low output; deficit financing and the national debt and finally tax reform.
Sadly, the regime missed a glorious opportunity of addressing these key issues.
Failing to address the key challenges of the day was a cowardly criminal omission that in any event has been the hallmark of Ncube’s tenure. To compound matters, he then proceeded to make shocking announcements on a supplementary budget and some tax increases.
The 2022 budget was ZWL$850 billion, but a ZWL$1.9 trillion budget is now being proposed. Effectively Ncube, is proposing a brand new 2022 budget which is 120 percent more than the original budget. This is sheer insanity driven by money creation and an overzealous fiscal policy.
They are failing to live within their means and are now resorting to money printing, a fact confirmed by Ncube’s admission that broad money grew by 245 percent by May 2022. That domestic debt is now ZWL$1.3 trillion is further proof of the existence of a profligate, irresponsible regime.
Collapsed public sector wages needed to be dealt with decisively. Anything short of a US$ wage won’t work. The proposed increase of the tax-free threshold to ZWL$600,000 when the exchange rate is now above 1:1000 is an insult.
Perhaps most shocking are Ncube’s tax measures which he was too embarrassed to read out. The most cruel is the increase to 30 percent of withholding tax on cross-border traders without a tax clearance certificate. This will hurt 60 percent of the population in the informal economy.
The reduction of Value Added Tax threshold from US$60,000 to US$40,000 will also hit hard the informal sector.
Big business is not spared. Corporates are now required to prepare two sets of accounts – one for US$ and another for ZWL$ transactions. This is a costly exercise confirming that we have become a Banana Republic
In short, this review was a complete disaster. It betrayed the absence of a theoretical, philosophical framework of its authors. It entrenched looting and arbitrage whilst unleashing cruel revenue measures. A dog’s breakfast!
- Tendai Biti is MP for Harare North (CCC) and Zimbabwe’s former finance minister