Minister of Finance and Economic Development Professor Mthuli Ncube, during a media briefing in Harare today said the budget presented in the parliament will deal with the twin deficits facing Zimbabwe.
The Minister said the budget deficit, which will double digit of the order of 11 percent plus, is an issue to deal with.
“Why we need to deal with it?” Mthuli said, “because it is a source of instability if it is not tackled.”
“It works in this way, a large budget deficit forces the government to borrow and by borrowing that results in the issuance of treasury bills… and that has an impact on money creation, put pressure on the currency and puts pressure on the preservation of value.”
The Oxford-educated Professor gave two ways of dealing with the budget deficit in Zimbabwe including revenue expansion to increase the net in terms of taxpayer base and also cost containment.
The Minister said Zimbabwe’s economy has become more informalized and bigger so there is need to know what has been driving the enlarged size of the economy and to be able to follow through in terms of tax netting.
“On the cost containment, the President His Excellency Emmerson Mnangagwa is leading from the front of this issue,” Ncube said. ” Why do I say that, he decided he will cut off his salary by 5 percent and the Vice Presidents also did the same, we as ministers and so deputy ministers did the same, company secretaries up to principal directors and also heads of parastatals (the SOE) and the executive directors also did the same.”
“So this leadership from the front on this issue of cost containment, that is the first thing that sets the tone for the cost containment issue around the government wage bill.”
Zimbabwe is currently facing a budget deficit as well as the trade deficit.
The fiscal deficit has been caused by diverting money to things that were not budgeted for according to the professor.
