The following are some of the highlights from Finance Minister Mthuli Ncube’s 2019 budget statement presented on November 22:

FUEL PRICES TO GO UP

Ncube says fuel market is “distorted” and the country’s fuel has become relatively cheaper compared to prices obtaining in the region, “creating an arbitrage opportunity for local consumers and transiting vehicles.” Starting on December 1, excise duty goes up by 7 cents per litre on diesel and paraffin and 6.5 cents on petrol.

ROAD ACCIDENT LEVY

Five percent of third party road insurance cover will be deducted and redirected to a Road Accident Levy  which will benefit victims of road accidents.

TRAFFIC OFFENCES TO ATTRACT HIGHER FINES

Road traffic offenses will be moved from levels 1 to 3 of the Standard Scale of Fines with a maximum monetary value of $30 to levels 8 to 10, which attract a maximum fine of US$700 and imprisonment for a period not exceeding 12 months, with effect from January 1, 2019. This should be a ” deterrent to criminal behaviour”, says Ncube.

SALARY CUTS

The government will, January 1, 2019, impose a 5 percent cut on basic salary, be effected for all senior positions from Principal Directors, Permanent Secretaries and their equivalents up to Deputy Ministers, Ministers and the Presidium. This is also extended to basic salaries of those in designated posts in State Owned Enterprises (CEOs, Executive Directors and equivalent grades), including Constitutional Commissions and grant aided institutions (like universities).

BONUS PAYMENT VARIATION

The government commits to paying a 13th cheque before the end of the year, but there are changes. Traditionally, payment of the 13th Cheque is computed as the sum of Basic Salary, Housing and Transport allowances. Previously, the Budget incurred expenditure of around US$174.6 million in bonus payment. The 13th cheque is, henceforth, computed based on Basic Salary only (excluding housing and transport allowances).

FOREIGN MISSIONS TO BE CUT

Zimbabwe “resolved to reduce the number of Foreign Missions,” according to Ncube. The country has diplomatic presence at 46 Embassies and Consulates, staffed by around 581 people. Budgetary support levels of around US$65 million currently are above available 2018 Budget capacity of US$50 million.

YOUTH OFFICERS TO BE RETIRED

Adding to the 3,188 Youth Officers retired from the civil service, Ncube commits to retire the 2,917  Youth Officers who still remain on the payroll by the end of December 2018.

BIOMETRIC REGISTER FOR CIVIL SERVANTS

To flush out “ghost workers” in the service, “who are contributing to the burgeoning public service wage bill which accounts for over 90 percent of total revenues”, Ncube says all government workers are to undergo biometric registration with effect from January 1, 2019. The registration process will be “rigorous and will involve capturing data on Letter of Appointment, Academic and Professional Qualifications, National Identification Documents, Employment Code Numbers, and Biometric Data. Biometric data will involve capturing of one’s unique physical attributes such as fingerprints, DNA, iris and retina pattern, using ICT.”

COMPENSATION FOR WHITE FARMERS

Ncube said the government was committed to finalising the issue of compensation to former white farm owners who were affected by the Land Reform Programme, in accordance with the country’s law and commitments under the various bilateral agreements and the Constitution. The government has put in place structures to determine the extent of government’s obligations and this should be finalised in the next few months.  In the interim, the 2019 Budget proposes to avail $53 million towards payment of compensation to former white farm owners, “whose disbursement will be targeted”.

DUTY LIFTED ON SANITARY WEAR

To “cushion underprivileged women and girls in the interim, whilst the local supply of sanitary wear improves,” the minister suspended customs duty on sanitary wear for a period of 12 months beginning December 1, 2018. He further exempted imported sanitary wear from Value Added Tax.

NEW POLICY ON GOVERNMENT VEHICLES

The use of government vehicles on public holidays and weekends “contributes to unsustainable build-up of outstanding payment arrears to service providers related to maintenance and fuel bills”, Ncube said. All government pool/project vehicles must be parked at the work stations or the nearest police station after designated working hours, during weekends and public holidays. All government pool vehicles will be transferred and centrally managed through CMED, but entities with capacity to maintain their fleet will be excluded from this directive.

VEHICLES TO PAY DUTY IN FOREX

Ncube says during the course of 2017 and 2018, the government witnessed a surge in the importation of nonproductive goods, particularly motor vehicles. “In order to redirect use of scarce foreign currency to the productive sectors of the economy,” he proposed that customs duty on motor vehicles be levied in foreign currency acceptable as legal tender, with effect from November 23, 2018.

TAX PAYABLE IN CURRENCY OF TRADE

Business are now required to pay tax in the Currency of Trade. Ncube says some have been “taking advantage of the arbitrage opportunities on the informal market” by receiving payments in foreign currency but only forwarding RTGS and bond notes to the government.

TAX-FREE INCOME THRESHOLD RAISED

Ncubbe says “in order to attract and retain skilled human capital and also cushion low income taxpayers against rising prices of basic goods, ” the tax-free threshold from the current $300 to $350.

IN NUMBERS

PUBLIC DEBT – As at end of August 2018, public debt stood at $17.69 billion, of which domestic debt accounted for 54 percent up from 49 percent, while external debt moved down from 51 percent to 46 percent.

REVENUE – Revenue collections for the nine months to September 2018 amounted to $3.8 billion, against a target of $3.4 billion, and by year end, collections of $5.5 billion are anticipated.

EXPENDITURE – Expenditures during the same period stood at $6.5 billion, against a target of $4.1 billion. Expenditure out-turn to year end is estimated at $8.2 billion against a budget of $5.3 billion, implying an expenditure overrun of $2.8 billion.

DEFICIT – 2018 budget deficit is projected at $2.86 billion (11.7 percent of GDP), against a target of $793 million.

TREASURY BILLS – The government has been issuing Treasury bills and bonds for the financing of the budget deficit, capitalisation of public entities, payment for past government debt as well as funding government programmes, including “Command Agriculture”. Between January to August 2018 alone, the government issued Treasury bills and bonds worth $2.5 billion. Outstanding government securities stood at $6.2 billion as at end of August 2018. Ncube says the lesson to learn from careful analysis of the nature of the quasi fiscal expenditures over a decade should remind us of Peter Drucker, an American Management Consultant and renowned strategist, who concluded that “nothing is less productive than to make more efficient what should not be done at all…”

INFLATION – Annual inflation gained 0.56 percentage points to reach 5.39 percent by September 2018, from the August rate of 4.83 percent. Inflation figures for October 2018 released by Zimstats show that annual inflation has gained 15.46 percentage points to reach 20.85 percent. Ncube however says “the spike in prices of goods and services appears to have receded, confirming that the main price hikes were a spontaneous response to uncertainty and confidence issue.”

GROWTH – Growth projection in 2019 is anticipated at about 3.1 percent, which is slightly lower than the 2018 expected growth of 4 percent, “reflecting the impact of unfavourable weather on agriculture and macrofiscal vulnerabilities from previous unsustainable fiscal and current account deficits.”

2019 PROJECTIONS – Nominal GDP projected at $31.6 billion, with REVENUES of $6.6 billion including retentions ($400 million), taxes ($6.037 billion), and non-tax ($162 million). EXPENDITURES are projected at $8.2 billion, out of which capital expenditures are estimated at $2.018 billion, leaving a balance of $6.1 billion for current expenditures. A deficit of $1.6 billion or 5 percent of GDP is projected.