The Mid-term fiscal review statement tabled by Finance and Economic Development Minister, Professor Mthuli Ncube last week, Thursday cast another glaring signal of a prolonged stay for the widely unpopular austerity days.
Ironically, there was great optimism in the days leading to the fiscal review statement that the Minister would come up with a waiver for the distressed consuming public that has suffered constant taxation and inflated prices since his coming into office.
Earlier, Ncube brought sweet news when he recently met a group of Journalists in the capital, Harare, where he revealed that austerity was no longer necessary going forward.
The Transitional Stabilization Program (TSP) has managed to yield $ 803.6 million budget surplus in first half of the year, a current account balance of US$ 196 million during first quarter of 2019 and has trimmed domestic debt to ZWL$ 8.8 billion as at end of June 2019 from ZWL$ 9.5 billion just six months ago.
“We feel that we have achieved what we intended to achieve through austerity. Our books are now in order, we are getting fiscal surpluses. We will soon be making the official pronouncement,” Ncube told the press recently.
But last week, the minister somewhat read a different script altogether, raising taxation, again.
With inflation last month hitting in excess of 175 percent, the Minister’s review of the minimum threshold for the 2 percent intermediary electronic transfer tax from ZWL$ 10 to ZWL$ 20 is highly inconsistent with inflation and remains a major choke for consumers.
This inconsistency between inflation trends and the tax threshold review is also evident from the tax free threshold for wages and salaries from ZWL$ 350 to ZWL$ 700.
Government has also gone on to increase tax payer interest on debt from five percent to 25 percent. This has prompted analysts to criticize Government of failing to appreciate that most companies are already on the brink of collapse due to mounting operational costs emanating from sourcing of alternative energy in the wake of worsening power cuts.
Consumer demand is at its lowest in recent times, compounding woes for local businesses.
There is also a widespread concern that over taxing by government is casting unfavorable multiplier effects on the overall economy particularly for domestic tourism that is beginning to suffer from the recent 400 percent upward review of toll gate and vehicle license fees.
“The latest pronouncements will greatly limit movement across the country hitting hard domestic tourism,” Passenger Association of Zimbabwe, president, Tafadzwa Goliati said.
“Luxury coaches plying the Harare-Bulawayo route for example are now costing as much as ZWL$ 170 while ordinary buses charge ZWL$ 100. The cost is just unbearable for passengers and there isn’t much Government is doing to address the plight of consuming public except milking hard from the impoverished masses whose incomes are not reviewed in any way,” added Goliati.
But economic experts are equally concerned with the direction the tide of expenditure is taking in the context that the Minister continues to push for tightening of belts for consumers.
Government expenditures are already posed for growth come second half of the year.
From a budgetary surplus of ZWL 803 million during first half, the minister has already hinted on a budgetary deficit in the second half.
Expenditure is anticipated at ZWL$ 14.4 billion against revenues of ZWL$ 9.11 billion translating into a ZWL$ 5.31 billion deficit by close of this year.
“We have heard about this transition for long. Let’s agree that the primary purpose of economic policy is to provide key human needs. That is the yardstick of measuring whether a policy is good or bad. The mere contraction of the economy and indeed the revenues in real terms against increases in taxation/GDP is a complete confirmation that all cylinders are misfiring,” wrote economic expert, Kipson Gundani.
Sentiment in the economy has been dwindling since beginning of the year, and the latest fiscal review statement hit hard on market participants, and fears are abound the economy is fast sliding into recession come end of year.