2017 budget should boost Govt revenues

11 Nov, 2016 - 00:11 0 Views
2017 budget should boost Govt revenues

The ManicaPost

Kudzanai Gerede Business Correspondent

THE focus of the forthcoming budgetary statement should be premised around boosting Government revenue on one side and cutting expenditure on the other in order to avert continued reliance on domestic borrowing to meet national targets as this has taken a huge toll on economic growth potential, industry has warned.

The Minister of Finance and Economic Planning Patrick Chinamasa is expected to present the 2017 National Budget end of month amid high expectations of candid interventions that will proffer economic stimulus.

Tackling perennial headwinds such as the huge fiscal and trade deficits, an excessive public wage bill and weak productive capacity is expected to be top priority in this budget despite Government’s limited financial capacity emanating from waning revenue platforms.

Observers say outside the urgent structural adjustments needed to curb excessive expenditure, there is need for Government to take seriously the expansion of its revenue streams which is a major complexity to the fiscal matrix.

For the past four years, Government has had to do with a paltry US$4 billion national budget which still had to be met through domestic borrowing. The huge Government footprint on the domestic borrowing market has crowded out private sector lending given limited resources in the financial services sector.

This has also seen Government domestic debt catapult to over US$1,4 billion with the continued issuance of treasury bonds as security projected to culminate into heavy debt burdens to treasury in the long-term.

The US$150 million fiscal deficit from the 2016 national budget was complemented by domestic borrowing.

Industrialist and president of Confederations of Zimbabwe Industries (CZI) Mr Sifelani Jabangwe in an interview with Post Business called for a balanced budget that will not plunge Government accounts into further debts but instead focus on augmenting its revenue stocks.

He said the introduction of SI64 will culminate in growth of local industries which would directly boost Treasury coffers through VAT, corporate tax, income tax and resurrect other downstream industries emerging from the manufacturing value chains.

“The budget should consolidate what Government has already achieved through SI 64 while it closes down on other weaknesses affecting optimum benefits from the instrument. We have seen investment coming in the country since the instrument was put in place so the budget should start from there, to consolidate and encourage more investment by way of local content regulation particularly to Government and parastatals. What is needed is a balanced budget that will not result in fiscal deficit. We expect the minister to plug leakages of duty on imports, if effectively done this will also boost Government tax collection,” he noted.

This comes in the wake of reports that items scrapped from the open general licence continue to find their way into the local market through illicit channels.

He also said taking cognisance of the small to medium enterprises as key components to the country’s economic narrative would create a hybrid economy which juxtaposes the formal and informal sector players particularly in primary sectors like agriculture and mining.

“There is need for Government to design and develop linkages that will see complementation of various players particularly in the Special Economic Zones as SMEs can become suppliers of key manufacturing components.

“There is a challenge though regarding formalisation of SMEs which Government should act upon by giving incentives which promote formalising their operations. Currently it’s too expensive for formal businesses to operate in the country and simplifying statutory instruments and costs can actually see the sector growing,” he added.

Observers say Minister Chinamasa should ensure that more SMEs venture into more productive lines of business which add value to the country’s output as opposed to ownership of corner shops selling various imported accessories.

Last month, ZimStat revealed that Manicaland had the highest number of business establishments in the country mainly SMEs trading in retails products such as clothing bales, food and beverages but still fell far below its provincial counterparts like Bulawayo, Harare and Midlands who have a significant number of industrial establishments which when it came to employment creation figures, size of annual turnover and amount of salaries paid per employee fared well ahead of Manicaland establishments.

However production levels remain relatively weak across all sectors of the economy despite several interventions by Government to ease the cost and flexibility of business in the country.

Despite Government achieving great strides in as far as implementing ease of doing business reforms which are still in the process of completion, the minister is tasked with finding solutions that will equip the economy to navigate past the liquidity crunch that has literally halted economic activity in the country.

The cash crisis has had adverse effects on most companies more so for importers of raw materials for manufacturing of pharmaceutical products for instance, delays in foreign payments continue to derails efficiency in production as suppliers are reportedly demanding cash up front.

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