Parliament says structuring next year’s budget presents a serious headache as the imploding economy continues to be saddled by runaway inflation and skyrocketing prices stemming from currency volatility.
BY FIDELITY MHLANGA
Inflation shot to 176% as of June when it was last recorded by ZimStat and has also seen prices of goods shooting through the roof.
Officiating at a pre-budget briefing seminar, Speaker of Parliament Jacob Mudenda said coming up with a budget in this environment was likely to be problematic.
“I was thinking by myself how do you come up with a budget that will not move up and down like a Yoyo? It’s frightening. It’s frightening. It’s a tall order for Parliament and it must be done in consultation with the Executive,” Mudenda said.
“In simple terms, how to come up with a budget so that the price of bread and mealie meal does not continue to rise, rise, rise is a challenge.”
Zimbabwe National Chamber of Commerce chief executive Chris Mugaga took a swipe at people pontificating that the local currency was one of the strongest currencies in the region judging by the exchange rate.
“At one time we heard the President (Emmerson Mnangagwa) saying our currency is one of the strongest in the region, I think we have technocrats misleading the President. You don’t determine the strength of a currency by using the exchange rate. It’s wrong,” Mugaga said.
Economist Gift Mugano bemoaned lack of confidence in the local currency, saying the economy risks full dollarisation by end of the first quarter of 2020.
“The question is: Are we going to have a budget in US dollar or Zimdollar? Zimbabweans are converting their money into US dollars because the local currency does not store value. Workers demand their salaries in US dollars. When that happens this means dollarisation,” Mugano said.
In the wake of the Zimdollar losing traction, Finance Mthuli Ncube announced a $10,8 billion supplementary budget, which was much higher than the initial $8 billion budget.
“In any set up you can’t have a budget surplus and a supplementary budget at the same period. You can’t have a supplementary budget higher than the budget itself,” Mugano observed adding that the hiking of bank interest rates by the central bank to dissuade speculative borrowing was misplaced.
“The interest rate regime is discouraging production. From 15 to 50 to 70% because there was an observation that people were borrowing money to buy forex. We don’t burn the house because there is a rat. We catch the rate. That is the tragedy we are having. We know who is driving the black market. Let’s deal with them,” Mugano added.
Further noting that there was need to put a lid on money supply, elimination of corruption on the exchange market, he opined that there was need to come up with a clear tax mechanism that is not burdensome to business, but encourages compliance.
“We must provide a tax mechanism that is easy to administer. Tax reforms have to kick in all sectors of the economy. In the mining sector we have 15 different taxes.If we continue to raise taxes we continue to lose it. The Vat of tourism must go. We can’t charge Vat on tourism and yet we need forex. We chase away forex to other regions,” Mugano said.
Mugano said it was worrisome that Zimbabwe was spending US$2,2 billion on import goods that can be produced locally.
These are cereals (US$519 million), vegetables (US$200 million), soyabeans (US$250) million, fertilisers (US$150 million), pharmaceuticals (US$250 million), iron and steel (US$300 million), tissues and paper US$105 million.
Another economist Persistence Gwanyanya slated monetary authorities for failing to stem the cash crisis.
“Why do I have to buy my own money? We need to increase the cash in circulation without increasing money supply,” he said.