HARARE – Finance minister Patrick Chinamasa’s delay in presenting the 2014 national budget betrays massive economic difficulties, indecisiveness and empty State coffers, analysts said yesterday.
This comes after Chinamasa told a pre-budget consultative seminar in Victoria Falls last week that he needed more time before making his maiden budget presentation since assuming the finance portfolio in a substantive capacity on September 11.
The national budget is traditionally tabled before Parliament by mid-November and the postponement is unprecedented.
“The delay indicates that he faces difficulties and has no clear way on which direction the economy should take,” said independent economist John Robertson.
“The notion that the delay is to have more time for consultation is misleading. What the country needs right now is to deal with serious challenges such as boosting agriculture and increasing industry’s capacity to produce.”
Robertson said there was no way the minister could make up the budget figures without funds amid burgeoning recurrent expenditure and dwindling revenue collections.
“The government can no longer continue to rely on the already overburdened individuals and companies for revenue,” Robertson said.
“What needs to be done is to articulate economic policies that attract foreign investment and create an enabling environment for business.”
He noted that the government will have to rely on external budgetary support but it was unfortunate that Zimbabwe had reputational risk emanating from its failure to address its debt overhang of over $10,7 billion.
Government is frantically looking for budgetary support from China, and the request has been tabled before ambassador Lin Lin.
“As a country we need to deal with issues to restore investor confidence,” Robertson said.
“Right now we have few friendly countries who can lend us money without thinking twice about the risk of not getting it back. Even China has set conditions that we cannot even meet unless we demonstrate our sincerity through austerity measures.”
The budget presentation will come at a time when the country is dogged by inherent economic challenges — chief among them lack of investor confidence coupled with policy inconsistencies, an acute liquidity crisis and massive power and trade deficits among other challenges.
Former Finance minister Tendai Biti said Zimbabwe desperately needs external budgetary support to help revive its economy.
He said the greatest challenge in formulating the country’s 2014 budget will be limited resources.
“…the task is always that of managing a tiny envelope in an ocean of high demand and huge expectations,” Biti said.
He noted that dwindling national revenues will exacerbate pressure on the post-election budget.
“With accrued arrears of over $300 million and other unbudgeted for expenditure such as the $150 million Zambia maize loan scheme and the recent debt accrued in respect of the $160 million government agriculture input scheme, it is Armageddon,” Biti said.
This comes as the Zimbabwe Revenue Authority (Zimra) recently announced that it missed revenue collection targets in the third quarter, collecting $897,3 million against an anticipated $904,9 million.
Biti — who is also the opposition Movement for Democratic Change’s shadow Finance minister — said it was imperative for government to secure financial support.
“The assumption that China or South Asia will provide resources is one that will be tested and its naivety proven,” Biti said.
“It is therefore easily foreseeable that the Zimbabwean dollar has to be brought back to allow monetisation of the humongous obligations and election promises made.”
Independent economist Christopher Mugaga said the impact of delaying presentation of the 2014 national budget was “very limited because not much is expected in terms of substance given the already depressed revenue inflows after adverse outcome from revenue targets.”
“It will not necessarily affect economic growth. After all, these funds (for the budget) are to be used effectively next year,” he said.
Mugaga pointed out that announcing “a depressed and disappointing budget was going to affect the economy more than the expectations of what the budget will be like.”
“Literally, there is nothing to announce, government needs funds which are not there,” Mugaga said.
“I am sure the whole budget envelope will not exceed $3 billion. The minister cannot throw himself into the same dungeon his party was criticising Biti for, so he believes delaying tactics will bring a modicum of decency and difference to Biti’s last three budget statements.
Unfortunately, the economy cannot be tricked.”
Last year, the economy grew by 4,4 percent and this year’s growth has been downgraded from 5 percent to 3,4 percent as a result of declining metal prices and drought.
In its 2014 outlook, the World Bank forecast Zimbabwe’s growth to be around 3 percent this year with little prospects for recovery in 2014.
“The economy faces uncertainty both from expected volatility in the global economy, and on the domestic front after July elections, amidst worsening macroeconomic indicators and increased vulnerability of the banking sector,” the World Bank statement said.
As Zimbabwe’s external position has been supported by substantial short-term capital inflows, the situation would be compounded by the risk of capital outflows from emerging markets, as the United States Federal Reserve progressively unwinds its expansionary monetary policy.
“Growth performance has been stymied by continued slowdown of the key sectors of the economy, amidst easing of international commodity prices, low investment, tight credit conditions, and policy uncertainty after the July elections,” the bank said.
A fortnight ago, Zimbabwe narrowly missed its third-quarter budget revenue targets as economic growth slowed and mineral royalties fell, underlining the tough task that Chinamasa faces to lift the economy.
The Zimbabwe Revenue Authority (Zimra) collected $897 million between July and September against a target of $905 million.
“The national tax collector said many companies were scaling down operations or were totally shutting down.
“The economy continued to face challenges such as erratic power supplies, liquidity constraints and depressed industrial capacity, among other challenges,” Sternford Moyo, the Zimra chairman said.