What Parliament said about Ncube’s 2019 budget

2.1           Credibility of projections in the Budget

2.1.1   The Committee observes that the 2019 overall growth projection of 3.1 % may be difficult to achieve, given the challenges the economy is facing such as foreign currency supply and allocation inefficiencies, exchange rate misalignment, inflationary pressures and reduced aggregate demand. The Committee is also of the view that the budget deficit of $1.6 billion in 2019 from US$2.8 billion in 2018 is ambitious given the prevailing macroeconomic environment and tight fiscal space.

2.1.2   Inflation is projected to close at 25.9% in 2018 from an initial budget target of 3.01%. In 2019, inflation is projected to close at 5% and to increase to 5.5% in 2020 and 5.8% in 2021.  The Committee feels that these inflation projections are highly optimistic and will likely be missed, considering foreign currency shortages which are likely to push parallel market rates. Moreover, the increase in excise tax on fuel and payment of duty in forex for selected goods is also expected to push inflation up. Expected low rains will also have a bearing on the food inflation. That together with the high cost of agricultural inputs may dent the anticipated inflation targets.

2.2           Currency issues

2.2.1   The Committee is concerned with the insistence in the budget that the RTGS/Bond and US$ exchange rate is 1:1 in an economy where a three tier pricing system is evidently widespread and is affecting the already burdened members of the society. This situation has been strengthened by recent policy pronouncements related to differentiation of local currency and NOSTRO accounts.

[Time Limit]

HON. MUSHORIWA: Mr. Speaker Sir, I move that the Hon. Member’s time be extended.

HON. CHIKWINYA: I second.

HON. MLISWA: On a point of order. Mr. Speaker Sir, it is quite worrying that it seems that the opposition and myself are appreciating the economics and there is silence in ZANU PF. I do not know if the Hon. Member is safe. –[HON. MEMBERS: Inaudible interjections]- I do not know if the Hon. Member is safe. They seem not to be appreciating the economics. Is he safe, why is there so much silence?

THE ACTING SPEAKER: Thank you. Hon. Member please resume your debate.

HON. MHONA: The Pre-Budget Strategy Paper for 2019 correctly points the exchange rate misalignment and the existence of a parallel market with a premium of 70% for every US$ to the RTGS/Bond (Local currency) in June 2018. This misaligned exchange rate essentially means that the Government is subsidising consumers using surrendered forex from exporting firms. The inconsistencies arising from such a position is the contributing factor to the current confidence deficit.

2.2.2   The Committee is also concerned with the likely challenges arising from implementing a US$ budget with devalued Bond or RTGS payment systems which imply huge costs on programme implementation. The fallacy of a US$ budget against Bond notes medium of exchange is threatening the implementation of this budget and negates the impact of the proposed reforms as the allocated resources are inadequate to meet expenditure forecasts, in real terms. The committee therefore wonders how the budget is going to account for Revenue and Expenditure where one part is forex and the other RTGS/Bond. One cannot discount the potential for illegalities and rent seeking behaviour.

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