Mishma Chakanyuka, Staff Writer 
ANALYSTS are anticipating that the fiscal authorities will strengthen funding for economic drivers in the 2023 National Budget to allow for economic growth.
The budget is expected to be presented in parliament today by Finance minister Mthuli Ncube.
Speaking to The Financial Gazette this week, economist Clemence Machadu said because 2023 is an election year, fiscal authorities would likely focus on expenditure with quick returns as well as policy clarity.
Mthuli Ncube, Finance Minister
“It is therefore, my hope that the budget will be bold in stimulating confidence. It is also my expectation that Treasury will release all the SDRs balances in the 2023 budget to go towards revolving funds for different sectors to modernise, recapitalise and enhance operations.
“The drip approach in utilising these resources does not commensurate with what the economy requires to ignite,” Machadu said.
He said the budget would probably look to foster supply chain resilience through import substitution, dealing with porous borders, and incentivising local production to reduce the economy’s vulnerability to external shocks as well as imported inflation.
“As we experienced drought this year as well as increased food prices, authorities should also swiftly act to provide safety nets to those who are vulnerable. Further, free agricultural inputs for households should be informed by concrete needs assessment and also accounted for transparently, to ensure that intended beneficiaries get the support and utilise it productively,” Machadu said.
Gift Mugano, another economist, expects the minister to allocate “adequate” funding to the health and education sectors in particular.
“These sectors have suffered a drought of funding in recent years. These sectors are key in powering our human capital which is a critical enabler of economic development,” Mugano said.
The health sector has for years been regarded as being in a dire states, which requires immediate attention and analysts say service delivery in the sector has depreciated due to old infrastructure and brain drain.
Gift Mugano
The education sector is facing, more or less, a similar ordeal to the health sector as funding is needed to finance the renovation of schools, facilitate the building of new schools, and competitively pay employees in the sector.
Eddie Cross, an economist, said the minister did not have much room to manoeuvre with the budget because of “structural issues,” but he expected Ncube to maintain his stance on a balanced budget.
“Perhaps there will be a small fiscal deficit, growth in line with GDP but strengthened expenditure on health and education,” Cross said.
The budget is also generally projected to remove constraints for business operations as a way of improving the environment.
Meanwhile, industry has been pushing for tax-breaks, saying the tax system in the country is negatively affecting the economy.
Machadu agrees with them, he said authorities must seek to address the “high taxation regime”, as it is shrinking the tax base.
“The target really should be to widen the tax base as opposed to overmilking the remnant formal sector in an environment that is already turbulent for them,” he said.
On his part, Mugano said the two percent and four percent tax on ZWL and foreign currency transactions must be scrapped.
“If the …minister of Finance continues with the IMTT, that is, the two percent tax on ZWL transactions and four percent tax on foreign currency transactions will negatively affect the economy in two ways, that’s through cost push inflation and entrenchment of dollarisation and informalisation of US$s.
“The four percent tax on foreign currency transactions imposes a serious burden on business and economic agents such that it discourages deposits of the US$.
“This is even worse on the 20 percent retention on domestic export is factored in,” he said.
In their recent submissions for the budget, the Confederation of Zimbabwe Industries (CZI) and Zimbabwe National Chamber of Commerce (ZNCC) pointed out that the government is placing too much emphasis on taxing the shrinking formal sector.
CZI and ZNCC advised that it is high time the IMTT tax became deductible just like other transaction taxes.
“IMTT is not tax deductible. Its application has to be different between businesses and consumers. The burden of the IMTT tax is huge on business, and therefore, the Chamber proposes that the ministry of Finance and Economic Development should allow the IMTT to be tax deductible and it should be removed when remitting tax to Zimra,” ZNCC said.
