Submissions on 2019 National Budget

Today, November 27 2018, ZCC team led by Rev Gwese who was accompanied by Moreblessing Mbire Musvanhiri (Communications Officer) and Admire Mutizwa (Economic Justice Officer) made Submissions to Parliamentary Portfolio Committees on the 2019 NATIONAL BUDGET. Here is a long but very important read.

1. The Zimbabwe Council of Churches (ZCC) comments the Minister of Finance and Economic Development for the presentation of his maiden National Budget on the 22nd of November 2018. The 2019 National Budget was presented to Parliament under the theme, “Austerity for Prosperity”.

2. The Budget was keenly awaited for by our member Churches with expectations for it to advance justice and shared economic prosperity in Zimbabwe through redressing the root causes of socio-economic deprivation.

3. We commend the Minister for the wider pre-budget consultations and we are convinced that building a nation remains a collective and shared effort. Furthermore, we reiterate that national budgeting processes must be founded on consultation, shared priorities, responsibility and internal orientation. As a Church, we believe a national budget must reflect stewardship, foster social cohesion, good governance, and prosperity for all.

4. Indisputably, the 2019 National Budget reflects resolute efforts by the Government to change the direction of the economy.

5. The ZCC is aware that the 2019 National Budget contains demanding measures to address the ‘twin’ problems of fiscal and current account deficits. Commendable proposals contained in the budget include:

a. Enhanced revenue mobilization resulting in the projected budget for 2019 of US$8.2 billion with a budget deficit of $1.6 billion (decline from US$2.9 billion in 2018). Total revenue for 2019 is estimated at about $6.6 billion, an increase of about 24.6% compared to 2018. The source of revenue however presents challenges to the poor and marginalized groups as the Government resorts to taxing the already impoverished people;

b. The budget shows commitment to reduce budget deficit from 11.7% of GDP in 2018 to only 5% of GDP in 2019. This is despite the projected 24% increase in revenues. In fact, the budget significantly contains expenditures with the increase being marginal at about 0.03%;

c. The Budget allocation for basic education, junior education, secondary education and tertiary education is about 26.7% of the budget against a 20% developmental target;

d. The requirement for all government Ministries and Departments to remit all revenues collected into the Consolidated Revenue Fund with immediate effect;

e. The budget consistently refers to Vision 2030 and the TSP despite that describing Vision 2030 as “an inclusive and collectively shared long-term national vision” is problematic;

f. Proposal for establishing the Foreign Currency Allocation Committee to be responsible with the allocation of foreign currency is. Hopefully this will address the problems of forex cartels;

g. Commitment by the Government to borrow from the Central Bank only 5% of the previous year’s revenue even though the Statutory limit is 20%; and

h. Public Service reform proposals that will save about US$88.8 million by making bonus payments only limited to basic pay, retiring 2 917 youth officers by December 2018, and imposing a 5% salary cut on Principal Directors’ grade up to Ministers and Presidium by 5%.

6. The Church is however, concerned that a number of reforms will have a significant negative impact on the poor than the rich thereby entrenching inequalities and other forms of deprivation. Among the concerns of the Church are that:

a. The 2019 budget addresses legacies of the past and is weak on directing a path of economic recovery and transformation;

b. In 2019, Government intends to roll over Treasury Bills (TBs) maturing “in consultations with players” but this will have an impact on future borrowings;

c. Except for education, the Budget allocations falls short of the international social develop¬ment benchmarks. Announced allocation for agriculture of $668.5 million is about 8% of the total budget against the developmental benchmark of 10% while the Healthcare allocation is about 8.4% of total budget against 15% target;

d. Revenue enhancing measures are skewed towards punishing those with lower incomes than the rich. Excise duty on fuel increased by 7 cents per litre on diesel and 6.5 cents for petrol will result in further increase of the prices of basic goods and services thereby reducing the purchasing power of the majority as salaries are sticky. The continuation with the Intermediated Money Transfer Tax (IMTT) will have a huge negative bearing on the poor;

e. The increase of the Tax-free threshold from $300 to $350 effective 1 January 2019 and widening of Tax bands is a welcome development. However, the two positive measures will not match the negative income effects imposed already inflation (20%), the 2% IMTT, and increase in Excise duty for fuel;

f. The call for a more pronounced role of the private sector in agriculture financing. Contract has failed in the cotton and other sectors mainly due to lack of legislation on contract farming;

g. Lack of sincerity by the Government to address the issue of the exchange rate. The proposal to establish a Foreign Currency Committee to oversee foreign currency allocation is positive. However, insistence on the I:1 policy is distortionary;

h. The 5% reduction of salaries for Senior Civil Servants, Ministers and Presidium is a welcome development. However, we are aware that Senior Officials in the Public Service do not depend on salaries but allowances and other benefits. The 5% will have an insignificant impact on their incomes and they may be able to recoup the same through allowances and benefits. The 5% salary reduction must not be simply a strategy to silence the poor over austerity; and

i. Only tepid measures have been put in place to manage the unsustainable build-up of outstanding payment arrears to service providers related to maintenance and fuel bills of government vehicles are look-warm.

7. The Zimbabwe Council of Churches recommends the modification of the 2019 National Budget measures in light of the plight of the majority of Zimbabweans and the need for justice and prosperity to be delivered together. We call for:

a. The IMTT must be revised downwards from 2% to 0.5% and the proceeds be ring-fenced towards social service delivery. The budget is silent on the uses of the IMTT. The Minister is not sincere to post-pone for considering further exemptions under IMTT to January 2019 when the citizens have expressed that the tax is excruciating.

b. Increase from 5% to 10% cut on salaries of all senior positions from Principal Directors, Permanent Secretaries and their equivalents up to Deputy Ministers, Ministers and the Presidium. The cut be widened to include basic salary, allowances and benefits.

c. The salary cut must be complemented by drastic measures of rationalising of foreign travelling and trips including a cap on the number of foreign trips by the President. Foreign Embassies must assume a greater responsibility of representing the country.

d. Only the President must be provided with the Government vehicle. Other Senior Government officials must be put on Government loan scheme to purchase their own vehicles.

e. The budget must adhere to developmental budgeting benchmarks requiring budget allocations for health and agriculture to account 15% and 10%.

f. The budgetary allocation for the security sector exceeding US$1 billion is consistently high for a country at peace and crowd out greater investment for social service delivery.

g. The appointing authority Foreign Currency Allocation Committee must differ with the institution drafting the operating framework in order to strengthen the independence of the committee.

h. The budget must be underpinned by a social contract between the government and the citizens. Ordinarily, election processes must result in social contract. However, the contestations of the July elections imply that there is no social contract between the government and the citizens. Government must therefore initiate processes that will inculcate social contract and for Zimbabweans to have some common identity.

i. Fostering trust and confidence among the public through national envisioning processes and addressing the issue of the exchange rate,

‘Behold, I will bring to it health and healing, and I will heal them and reveal to them abundance of prosperity and security.’ (Jeremiah 33 verse 6)

Source: Zimbabwe Council of Churches