EDITORIAL COMMENT: Budget sets tone for economic rejuvenation

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THE 2015 national budget statement is out and the economic path for the country in the next 12 months is clear to all. Finance and Economic Development Minister Patrick Chinamasa unveiled the $4,1 billion budget in Parliament on Thursday in which he captured a wide array of policy interventions aimed at stimulating economic growth —particularly investment.

We share the hope that an economic turnaround beckons for the country but not in the short term as expected by many.

A strategic paradigm shift in the form of deliberate policy interventions and legal framework reviews is what the country needs most at the moment — more than just figures and budgetary allocations that often do not materialise in anything tangible.

This was the thrust of Chinamasa’s message in his budget statement.

The minister played a delicate balancing act in that he did not only take into cognisance the prevailing economic environment, but emphasised the importance of widening the involvement of a multiplicity of actors in economic development through re-engagement of private sector players, domestic and foreign investors, global finance houses and development partners.

We feel the government deserves to be commended for being realistic and pragmatic in approach by laying bare the bad state of the economy —characterised by low revenue inflows, underperforming industry and reduced investment due to entrenched bottlenecks.

In light of this reality, Chinamasa announced that government would relax terms of the Indigenisation and Economic Empowerment Act to make the law more flexible with foreign deals now a matter for negotiation with line ministries.

He noted the need to develop strong linkages between industry, education, research and development—the critical skilled human resource base.

We applaud the minister for emphasising the need to revitalise the fundamental principles of promoting macro-economic stability by crafting credible and predictable policies that promote inclusive growth and a conducive investment environment.

Given the suppressed growth, Chinamasa said 82 percent of the $4.1b budget would be gobbled up by employment costs, leaving a paltry eighteen percent for capital expenditure and operations.

He, however, projected the economy to grow by 3, 2 percent in 2015 with inflation remaining subdued below one percent.

Significant growth is expected in the agriculture sector, which for the first time since the land reform, received solid support of up to $1,72b in which the banking sector is the major funder.

Chinamasa projected the ailing manufacturing sector would grow by 1,7 percent next year and announced a $200 million boost for firms.

Given the prevailing economic hardships, the government eased the tax burden by increasing the tax free salary threshold to $300 from $250 and widened income tax bands to bring relief to tax payers starting January 1, 2015.

Meanwhile, those earning between $301 to $1,500 would be taxed at 20 percent, 25 percent for the $1,501 to $3,000 bracket and 30 percent for those earning up to $5,000.

Chinamasa said such initiatives were meant to raise the aggregate demand for goods and services given the declining consumer disposable income in the wake of tight liquidity and joblessness.

The minister, however, was silent on the tax free bonus threshold, set at $400 last year.

Among the budget’s other major highlights were proposals to lower prices of domestic goods to enhance industrial competitiveness and curb the dominance of imports.

Minister Chinamasa said the Industry and Commerce Ministry had identified cost drivers contributing to the high cost of production and prices that needed to be addressed.

We feel his message on enhancing the ease of doing business is spot on as it is critical in attracting investors.

Tax relief on exports, scrapping of royalties on rough diamonds and suspension of tax on unprocessed platinum are some of the measures we feel will quicken beneficiation and value addition and bolster domestic growth.

These interventions are set to boost mining output while tourism is also projected to register above four percent growth.

The government expects to raise more revenue through an increase in excise duty on cigarettes to $20 per 1,000 sticks from $15.

What is needed now is for all Zimbabweans to rally behind the government in quickening the implementation of the stated measures to reach the desired collective destiny.

Patience and diligence as the country works on strengthening its economic architecture is therefore required from all progressive minds.

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