Yesterday, the Finance Minister Mthuli Ncube presented the 2019 Budget titled Austerity for Prosperity. With nominal GDP projected at US$31.6 billion in 2019, the economy can generate revenues amounting to US$6.6 billion for 2019, including retentions (US$400 million), taxes (US$6.037 billion), and non-tax (US$162 million). 2019 expenditures are projected to reach US$8.2 billion indicating a budget deficit of US$1.6 billion which is 5% of the country`s GDP. Below are major highlights from the budget.
Bond/US$ rate remains at 1:1
The Bond/US rates remain pegged at 1:1 despite the prevailing economic conditions. The finance minister has not acknowledged the differences in the value of bond notes and the US$.
Sovereign Wealth Fund to be established.
A wealth fund is going to be established which will be an instrument for building financial reserves for the country. The Finance Minister`s goal is to address the current macro-economic vulnerabilities faced by the economy. A wealth fund will act as another tool to assist in the mopping up of excess liquidity in the economy.
Establish a venture fund for SMEs
This Budget seeks to contribute towards the establishment of Venture Funds, targeting the game changing SMEs sectors. The Venture Funds will augment the role of the Empower bank and Women’s bank.
Privatisation of 5 state owned entities to raise $350 million
The budget proposes to privatise 5 public enterprises namely Tel-One, Net-One, Telecel, ZimPost and POSB. About US$350 million is expected to be raised from this privatisation process.
Compensation of former white farmers
The 2019 Budget proposes to avail US$53 million towards payment of compensation to former white farm owners.
Motor vehicle imports to be paid in US$ effective from 23 November
In order to redirect use of scarce foreign currency to the productive sectors of the economy, customs duty on motor vehicles be levied in foreign currency with effect from 23 November 2018. Customs duty in foreign currency will also apply on selected goods to be announced in due course.
Government pool/project vehicles
As part of improving the management system of the government fleet, government pool/project vehicles will have to be parked at the work stations or nearest police station after designated working hours, during weekends and public holidays.
5% salary cuts for government top-officials
Government has decided that effective 1 January 2019, a 5% cut on basic salary, be effected for all senior positions from Principal Directors, Permanent Secretaries and their equivalents up to Deputy Ministers, Ministers and the Presidium.
Excise duty of fuel will be increased by 7 cents per litre on diesel and paraffin and 6.5 cents on petrol to reduce the arbitrage opportunities.
Tax-free threshold increased
The tax-free threshold has been reviewed upwards from US$300 to US$350. The tax band has been widened from US$351 to US$20 000, above which income will be taxed at the highest marginal tax rate of 45% down from 50%.
Debt and arrears clearance road map
The debt and arrears clearance road map entails clearing arrears worth US$680 million owed to the African Development Bank (AfDB), more than US$1.4 billion owed to the World Bank(WB) and about US$308 million owed to the European Investment Bank (EIB) in 2019.
Treasury Bill Auction System
Government will move away from the private placement to the auction based system of issuing Treasury bills and bonds as part of efforts to improve transparency, better price discovery, enhance confidence and allow market determined interest rates. There will be a revival of the issuance of bonds through the development of a secondary bond market as well as exploring the possibility of listing such bonds on the stock market.
Payment of bonuses
Government has taken the position that bonus be payable for 2018, with commitment that these payments be processed before year end. The bonus will be computed based on Basic Salary only (excluding housing and transport allowances).
Retirement of Youth officers
2 917 youth officers still listed on the payroll are going to be retired by end of December 2018. Their posts will be removed from the establishment.
Bilateral Investment Promotion and Protection Agreements (BIPPAs) to be ratified.
Two BIPPAs awaiting signature and twenty two BIPPAs under negotiation will go through both the approval and ratifcation processes in 2019
Recommended retail price
Pharmaceutical manufactures shall be required to come up with and publish the Maximum Recommended Retail Price agreed among manufacturers, wholesalers and retailers.
Click the Download button below to download the 2019 budget statement.
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