Finance Minister Mthuli Ncube presented his mid-term review and budget statement for 2022 on Thursday. It was painful to indulge in an hour of pointless and tired monologue. An absolutely wet firecracker.
A huge opportunity has been missed to tackle the fundamental imbalance of the economy centered on seven key issues which are: hyperinflation; exchange rate collapse; collapsing public sector wages; collapse of the social sector; low yield; the financing of the deficit and the national debt and finally the tax reform.
Unfortunately, the regime missed a glorious opportunity to address these key issues.
Failing to meet the major challenges of the time was a cowardly criminal omission which, in any event, has been the hallmark of Ncube’s tenure. To complicate matters, he then made shocking announcements about a supplementary budget and certain tax increases.
The 2022 budget was ZWL$850 billion, but a budget of ZWL$1.9 trillion is now proposed. Indeed, Ncube is offering a brand new 2022 budget that is 120% higher than the initial budget. This is sheer madness driven by money creation and overzealous fiscal policy.
They are failing to live within their means and are now resorting to printing money, a fact confirmed by Ncube’s admission that broad money rose 245% in May 2022. This domestic debt rises now at ZWL 1.3 trillion. , irresponsible regime.
The collapse of public sector wages had to be dealt with decisively. Anything less than a US dollar salary will not work. The proposed increase in the tax exemption threshold to ZWL$600,000 when the exchange rate is now above 1:1000 is an insult.
Ncube’s tax measures, which he was too embarrassed to read about, are perhaps the most shocking. The most cruel is the increase to 30% of withholding tax on cross-border traders without tax clearance. This will affect 60% of the population in the informal economy.
The reduction of the value added tax threshold from US$60,000 to US$40,000 will also hit the informal sector hard.
Large companies are not spared. Businesses are now required to prepare two sets of accounts – one for US dollar transactions and another for Zimbabwean dollar transactions. It is an expensive exercise which confirms that we have become a banana republic
In short, this review was a complete disaster. It betrays the absence of a theoretical, philosophical framework of its authors. It has entrenched plunder and arbitration while triggering cruel revenue measures. A dog’s breakfast!
READ: Mid-year 2022 budget statement
Tendai Biti is MP for Harare North (CCC) and former Finance Minister of Zimbabwe