“We cannot do this without pain. My view is that there’s more pain at the beginning of the first year or two as we stabilise our macro-economy.”
Finance Minister Mthuli Ncube has introduced a raft of measures meant to shore up the country’s dwindling financial resources, including a new tax on mobile money transactions, a reduction in the civil service, limiting international travel, and the disposal of state entities.
Addressing journalists earlier on Saturday, Ncube said that in this transition period government would not be treated as a sacred cow, as the Treasury had begun to close loose financial taps, and rejecting “unjustified” requests for funding, starting with glaring leakages such as extravagant foreign travel, unscrupulous procurement practices which ripped off government, imprudent borrowings to finance unnecessary expenditure, and lavish spending on luxury cars and benefits for senior civil servants.
As part of the austerity measures, the civil service would be “right-sized” through retrenchments, retirements, and skills restructuring, backed by a new incentive system which would be introduced for those retained.
The 2019 and 2020 national budgets would introduce wage bill containment measures which would reduce the annual wage bill outlay by US200 million, about 0.7 percent of the country’s gross domestic product (GDP).
“We are dealing with a bleeding economy, a bleeding government. We are asking everyone to contribute to fixing the economy. We cannot do this without pain. My view is that there’s more pain at the beginning of the first year or two as we stabilise our macro-economy.
“After that, we are all happy that we took the pain together as a nation at this stage and we go forward. People don’t realise that they are already indirectly paying for the weak economy. What we are faced with is not direct, but indirect. All we are doing now is fixing it together by doing sacrifice,” he said.
Ncube promised that within four months the Treasury would report on how much had been collected in tax and how it had been used.
The tax adjustments had been prompted by high economic informality, which had narrowed the tax base and reduced tax compliance. In a 2016 study of informal economies around the world, the International Monetary Fund estimated Zimbabwe’s economic informality at over 60 percent.
“It’s true that the economy is highly informalised, but financial inclusion has also increased. Thanks to the mobile telecommunication companies and banks, the use of electronic money has deepened.
“You find that measures that were effective before in broadening the tax base are no longer effective. So, we have to come up with new measures and this is one new measure,” Ncube said.
“The previous tax arrangement was regressive. At the higher end, people were paying very little and this is introducing some fairness,” he said.
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