Former Finance Minister Tendai Biti says Treasury boss Mthuli Ncube’s 2022 mid-term review and budget statement failed to address fundamental challenges bedevilling the economy.
Posting on Twitter, Biti, who is CCC deputy president and Member of Parliament for Harare East, said that the fact that broad money grew by 245% by May 2022 shows that the government is failing to live within its means and is resorting to money printing. Biti wrote:
The Minister of Finance has presented his 2022 mid-term review & budget statement. It was painful to indulge in an hour of a pointless, tired monologue. An absolute damp squib.
A huge opportunity was missed to address fundamental disequilibrium in the economy centred around 7 key issues that are 1) hyperinflation 2) exchange rate collapse 3) collapse in public sector wages 4) collapse of the social sector 5) low output 6) deficit financing & the national debt 7) tax reform.
Sadly the government missed a glorious opportunity of addressing key issues. Failing to address the key challenges of the day was a cowardly criminal omission that in any event has been the hallmark of Mthuli’s tenure.
To compound matters, Mthuli then proceeded to make shocking announcements on a supplementary budget & some tax increases.
The 2022 Budget was a ZWL$850 billion budget, but a ZWL$1.9 trillion budget is now being proposed.
Effectively Mthuli is proposing a brand new 2022 budget of 120% more than the original budget. This is sheer insanity driven by money creation & an overzealous fiscal policy.
They are failing to live within their means & are now resorting to money printing. A fact confirmed by Mthuli’s admission that broad money grew by 245% by May 2022.
That domestic debt is now ZWL$1.3 trillion is further proof of the existence of a profligate irresponsible regime.
Collapsed public sector wages needed to be dealt with decisively & anything short of a US$ wage won’t work.
The proposed increase of the tax-free threshold to ZWL$600 000 when the exchange rate is now above 1:1000 is an insult.
Perhaps most shocking are Mthuli’s tax measures which he was too embarrassed to read out. The cruellest is the increase to 30% of withholding tax on cross-border traders without a tax clearance certificate.
This will hurt 60% of the population in the informal economy. The reduction of the Value Added Tax threshold from US$60000 to US$40000 will also hit hard the informal sector.
Big business is not spared. Corporates are now required to prepare two sets of accounts, one for US$ and another for ZWL$ transactions. This is a costly exercise confirming that we have become a Banana Republic.
In short, this Review was a complete disaster. It betrayed the absence of a theoretical philosophical framework of its authors. It entrenched looting and arbitrage whilst unleashing cruel revenue measures. What a dog’s breakfast!