Zimbabwe: Top Economist Plays Down Ncube's Tax Based Economic Growth

Photo: The Herald
Finance and Economic Development Minister Professor Mthuli Ncube addresses Parliament on the state of the economy on May 15, 2019.

A TOP economist says government still has a lot to do in terms of increasing revenue by other means and not just rely on taxes alone to expect significant growth of the economy.

Persistence Gwanyanya was responding to a statement delivered by Finance Minister Mthuli Ncube in parliament on Wednesday.

Ncube, in his statement, revealed that cumulative tax collections in the first quarter of the year jumped to a record RTGS$1,9 billion against a target of RTGS$1,8 billion.

This, he said, resulted in a positive performance of RTGS$146 million or 8,2 percent.

However, Gwanyanya said even though government had done well in re-balancing its books in respect of surpluses, more should be done in terms of reducing expenditure.

"Yes we have done much progress in re-balancing our books in respect of surpluses and we managed to generate as a country from a deficit position," Gwanyanya said.

"Our analysis of that progress points to the fact that we need to do more in expenditure reduction.

"It was clear the budget was going to be revised upwards. The government has experienced revenue into its coffers since end of last year into the first quarter of this year.

"Due to an increase in excise duty and 2 percent tax, there is nothing much to surprise us because of the tax system that was introduced.

"These were major drivers of revenue increase and I am worried about government. What is it doing to reduce expenditure? There is need to reduce expenditure."

Gwanyanya stated that the rise in inflation was reflective of expenditure being out of control causing an unpleasant traction.

Minister Ncube, in his statement, highlighted that inflation remained relatively high at 66 percent.

"For a growth of 6.2 percent is not surprising. Inflation is going to continue rising because of the multi-currency regime.

"The surpluses that we have generated are not going to result in an immediate improvement in our situation regarding inflation and cash situation due to our historical position that we are coming from. We have got so much debt at government level, so the surpluses are going to sort out those historical debts just like the overdraft on RBZ.

"There will be no significant impact as we speak right now, that is why even in their model, RBZ uses a model that says 'the policy impact will be realised and start to show significant progress between 6-18 months. The situation will not improve overnight. The economy was grossly damaged and it decayed for too long a period.

"There is no easy way out for this country. The journey is still long for Zimbabwe. The government is taking a positive direction but we expect them to do more and reduce expenditure. To be more accountable and correct the country's situation."

Ncube however said the government was focusing on the re-stabilisation programme (TSP) and economic growth with the introduced deep reforms cushioning the economy.

"The budget deficit and current account have declined substantially in the last few months in the positive fraction. There is much improvement on government financial revenues of RTGS$1.9 Billion out-performing a targeted figure of RTGS$1.8 Billion during the First Quarter of 2019," said Ncube adding that drought and the recent Cyclone Idai effects had contributed much to the severe economic challenges which posed serious threats to economic growth.

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