The 2021 National Budget will prioritise preserving the stability of the Zimbabwean Dollar and arresting inflation to allow citizens room to save, invest and plan, Finance and Economic Development Minister Professor Mthuli Ncube has said.
Previewing the Budget in an interview yesterday at the end of Parliament’s three-day pre-budget seminar, Prof Ncube said price stability will be at the centre of his budget proposals.
Minister Ncube will present a $421 billion Budget in Parliament on Thursday.
“The overarching goal for this Budget is to support macroeconomic stability in terms of prices and currency stability and stability in the general environment,” said Prof Ncube.
“Because with stability we can do so much, companies can plan, people can save, citizens can postpone consumption and they can invest because they will know that the value of their currency is being preserved.
“In terms of specific measures, we will continue to support the Foreign Currency Auction System that we have put in place.”
The local unit has garnered significant stability since the introduction of the auction system in June.
Before the system was launched, the Zim Dollar was trading at around US$1: $120 but has since stabilised at below US$1: $82 over the last two months.
The Reserve Bank of Zimbabwe has so far allotted US$434.3 million to the auction bringing relief to the business sector.
Minister Ncube said Treasury will maintain a stranglehold on Government spending in order to avoid huge budget deficits.
“We will make sure that we continue to live within our means as a Government so that we do not create a risk for the currency by running large budget deficits,” he said.
“We will only tolerate small budget deficits; so fiscal discipline is critical.
“We will also make sure that we support our currency strategy, which remains our competitive tool.
“For industry, you can see how our manufacturing sector is beginning to recover and it is because we have a currency that acts as a competitive tool for our industry, in terms of export and domestic production.
“We will also ensure that money supply growth remains within target and it doesn’t become a risk to the value of the currency and indeed inflation.”
The Budget, said Minister Ncube, will seek to strengthen the economy’s resilience to shocks.
He said it will also offer massive incentives to consumers in order to promote consumption.
“You should expect a budget that will basically strengthen the resilience of the economy.
“We are talking about resilience to shocks such as climate shocks, shocks from macroeconomic instability and shocks from the pandemic.
“Hence it will have a very strong resilience element to it.”
He said the budget will seek to relaunch the economy towards a growth trajectory by giving incentives to the private sector and to foreign investors.
Government will also resume token payments for the debts owed to International Finance Institutions, particularly the Paris Club, said Prof Ncube.
The 2021 Budget will be the first implementing tool for the recently launched 5-year economic programme, the National Development Strategy (1).
Earlier on, responding to presentations made during the seminar, Minister Ncube said Treasury had received budget requests of up to $1.1 trillion.
“We have determined the expenditure outlay for 2021 to be ZWL$421 billion as per our macroeconomic framework.
“We are confident that the allocations being considered for each ministry are a decent improvement to enable optimal service provision in all NDS1 priority areas.”
He said Treasury will review upwards tax bands with tax free threshold to allow workers more disposable income.
The Budget, he said, will revise upwards the minimum taxable amount for the Intermediated Money Transfer Tax.
“I acknowledge that the value of non-taxable transactions has been eroded by inflation.
“In this respect, review of the threshold is indeed a matter under consideration, but I can assure you we will make a review.
“As is the case with the non-taxable portion for IMTT, the tax-free threshold for employees’ tax (Pay As You Earn) is under consideration as a 2021 National Budget measure and again the outcome will be known when the Budget is presented.
“But I must hasten to add that often this tax-free threshold always becomes a default minimum wage so wherever you set it, you are in fact by default setting a minimum wage.
“That is what companies do when they hear announce it, so we are taking that into account.”
Government will ring-fence 20 percent of revenue collected through the IMTT tax to fund free education in public schools.
Provision of sanitary wear for girls in schools will also be expanded, said Minister Ncube.
“I take note of the proposal to improve the allocation for BEAM to achieve SDG 5, revival of school grants to reduce the cost burden of education on families and communities, free sanitary ware for rural schools, ring-fencing 20% of the IMT tax for provision of free basic education in 2021 and need for sustainable education sector financing mechanism biased towards innovation.
“I totally agree that the Basic Education Assistance Model (BEAM) is very critical in ensuring access to education for the vulnerable.
“The current allocations for BEAM will be improved in 2021 to target about 1.5 million children.
“I further take note of the need to ring-fence 20 percent of the IMT tax for provision of free basic education in 2021 and the need to have sustainable education sector financing mechanism, biased towards innovation.”
He said the Budget will also provide funding for the acquisition of 100 ambulances for public hospitals.
Government will also establish an air ambulance service, he added.
“Many stakeholders have raised concern regarding the need for Government to procure ambulances.
“Acknowledging this need, in the 2020 Budget Treasury had provided for the procurement of 100 ambulances.
“However, due to procurement challenges, these resources have not been utilised.
“In this regard, the 2021 Budget will again set aside resources towards this purpose and I hope that the procurement process will be expedited to enable delivery of ambulances in 2021.”
He added: “Already, the procurement of operational of vehicles for ZRP is underway with delivery of the first batch of 100 vehicles expected this month whilst the balance of 400 will be delivered in following months.”