FINANCE minister Mthuli Ncube last week announced an ambitious $421.6 billion budget, which analysts and economic experts doubt will extricate many Zimbabweans, who are currently swimming in a sea of poverty.
Ncube said while the economy will contract by -4.1% by year-end, it will rebound with a growth of 7.4% before stabilising at an annual growth rate of 5% thereafter.
The national budget, which came after President Emmerson Mnangagwa launched a new economic blueprint, the National Development Strategy One (2021-25), will be mainly funded through a raft of existing and new taxes. For critics, it is the taxation of the informal sector, which will leave many tightening their belts.
To finance the budget, the government is squeezing everyone. This includes those of you running small stalls at places such as the Gulf Complex in downtown Harare. Street hustlers, such as those selling tech gadgets and mobile phones, will now be charged tax equivalent to US$30 per month per unit. A restaurant or liquor centre, which is smarting from months of closure due to Covid-19 is now required to pay $$10 000 per month in taxes.
Out of this budget, the health sector received a vote of $54.7 billion, which translates to nearly 13% of the total votes. This allocation was second to that of the Ministry of Primary Education, which received $55.2 billion.
While this appears to be a marked shift from previous years, signalling the government’s thrust to meet its regional obligations, economic analysts and experts said the economy needs more to tick.
In April 2001, African Union countries met and pledged to set a target of allocating at least 15% of their annual budget to improve the health sector and urged donor countries to scale up support. Years later, a few countries in Africa have reached this target, which is widely known as the Abuja Declaration.
“The budget does not adequately put resources into the key social sectors necessary or sufficient to get a debt on poverty,” said economist Prosper Chitambara.
“We are failing to meet regional benchmarks in terms of social spending, health, education, water and sanitation. We are relying too much on donor support and this is not sustainable.”
He said despite this, the budget is aligned to the country’s economic blueprint, the National Development Strategy (One).
Christopher Mugaga, Zimbabwe National Chamber of Commerce chief executive, said while Treasury had allocated the second largest vote to the Health ministry after the Primary Education portfolio.
“The onus is on Ncube to strengthen relations with the donor community. He has to do that because no matter how arrogant we are as a country we have a collapsed health sector,” Mugaga said.
“We need a micro insurance industry because the economy has become small scale. Zimbabwe’s public health sector is as good as collapsed. There is also under-insurance of health insurance due to high unemployment. Players are now demanding payment of subscriptions in United States dollars and this has resulted in exchange losses.”
With no budgetary support due to a huge external debt, Treasury has been relying on domestic resources to finance capital projects. This, however, has resulted in limited funding for social spending, thereby exposing vulnerable groups to the harsh economic environment.
Tendai Biti, former Finance minister under Zimbabwe’s inclusive government, which was widely credited for stabilising the economy between 2009 and 2013, after hyperinflation officially reached 213 million percent in June 2008.
“This budget is a viciously anti-working people budget. It fails to restore US dollar salaries. It’s predicated in Zimbabwean dollars when the whole country is a now a US dollar cash economy,” Biti said.
“The budget imposes massive presumptive taxes on the informal sector including a US$30 tax on their rentals. It also includes the banning of importation of second-hand vehicles when that is what the workers are surviving on—your Honda Fits and Runx (small sedans). It shifts money to securocrats and subjects of corruption like your Beitbridge road.”
According to Ncube, Zimbabwe has spent around US$1.3 billion importing vehicles over the past five years. Cars older than 10 years are now off the Open General Import Licence, meaning that from next year, a special import licence for older cars will be a prerequisite.
Zimbabwe Poverty Update (2017-19), a joint report compiled by ZimStat and the World Bank, shows more people have been thrown into deep poverty.
The number of extremely poor people rose from 4.5 million in 2017 to six million during April–May 2019, but the number of poor people measured by the lower-bound poverty line rose from eight million to 8.9 million during the same period.
“Extreme poverty rose from 30% in 2017 to 38% in April-May 2019, and general poverty (measured by the lower bound poverty line) rose from 43% to 51% during the same period,” the report says.
“Although extreme poverty increased in both urban and rural areas, in relative terms, extreme poverty rose more in urban areas.
“In absolute terms, rural extreme poverty remained much higher than urban extreme poverty. The general poverty rate based on the lower bound poverty line remained high. It changed marginally for the rural population, but in urban areas it rose sharply, from 16% to 24% during the same period.”