Finance Minister Mthuli Ncube is set to present his Mid-Term Fiscal Policy Statement today, with business groups and economists urging him to introduce measures to revive the sluggish economy, reports Business Times.
They emphasized that to rejuvenate the struggling economy, Professor Ncube must also create policies that attract investors.
This mid-term budget review comes at a critical time, with the economy facing numerous challenges such as a harsh tax regime, widespread corporate closures, and high unemployment.
In today’s review, they expect Professor Ncube to show a commitment to managing debt and reducing government spending. They also stressed the importance of addressing the high cost of doing business and the lack of investment inflows. With growing recurrent expenses and a shrinking tax base, Zimbabwe’s fiscal space is under severe strain.
They advised Ncube to tackle the issue of loss-making state-owned enterprises that have been a financial drain due to continuous bailouts. They suggested policies to make these entities financially self-sufficient, relieving the fiscal burden.
The 2% tax on electronic transactions, which has adversely affected both citizens and companies, should be abolished as it is harming the economy, they argued. Banks have called for a reduction of this tax, known as the Intermediated Money Transfer Tax (IMTT), which has deterred individuals from using banks.
According to the Bankers Association of Zimbabwe (BAZ), the IMTT is hindering formal transactions and increasing the cost of production, thereby reducing export competitiveness and the country’s capacity to earn foreign currency. BAZ also noted that the IMTT has led to a rise in cash transactions, which often occur in informal establishments not subject to broader tax obligations, resulting in increased revenue leakages.
Local banks, which have lost numerous correspondent banking relationships in recent years, stressed the need for the government to address the debt situation to attract new foreign capital. They urged the finalization of the Arrears Clearance and Debt Relief Strategy, which involves strengthening cooperation with International Financial Institutions (IFIs) and negotiating for debt relief and restructuring.
The Zimbabwe National Chamber of Commerce (ZNCC) has also voiced concerns about excessive taxation, calling for revisions to punitive tax policies and urging expedited debt settlement procedures to secure long-term funding.
The Chamber of Mines Zimbabwe (CoMZ) expressed concern over the Special Capital Gains Tax on the transfer of mining titles, arguing that the tax’s retrospective application creates uncertainty for investors. They recommended revising the tax rate and structure to align with best practices and enhance investment attractiveness.
Economist Vince Musewe argued that the country’s debt will continue to rise due to the government’s failure to implement necessary reforms, suggesting that a debt write-off is the only viable solution. Economist Dr. Prosper Chitambara concurred, emphasizing the need for expedited arrears clearance and international engagement to lower Zimbabwe’s investment risk premium.
Eddie Cross, another economist, echoed these sentiments, highlighting the importance of a comprehensive debt statement due to the growing national debt. Persistence Gwanyanya, a member of the Monetary Policy Committee, emphasized that restructuring debt is crucial for economic recovery.
At a recent event, David Mnangagwa, the Deputy Minister of Finance, Economic Development, and Investment Promotion, hinted that there would be no new tax increases in the upcoming review, suggesting a focus on reevaluating and optimizing government expenditure instead.
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