Home » General » FINANCE MINISTER ANNOUNCES INCENTIVES, PENALTIES TO REJUVENATE ZIMBABWE’S SAGGING ECONOMY

HARARE, July 31 (NNN-NEW ZIANA) — Finance Minister Patrick Chinamasa has unveiled a mixed bag of tax concessions and penalties in a Mid-Term Policy Statement as he seeks to breathe new life into the country’s sagging economy.

The economy, battered by two-decades of Western sanctions, had been projected to grow by 3.2 per cent this year, but the finance minister said Thursday that drought, policy inconsistencies and other factors had slashed this target.

Among the policy inconsistencies, Chinamasa cited the continued importation on concessional taxation of uncritical goods such as second-hand clothing and basic foodstuffs, which had crippled local industry.

In his policy statement in Parliament, he banned imports of second-hand clothes, and raised duty on a wide range of basic foodstuffs and other goods which are locally available.

The move, long sought by domestic industry, is intended to increase local production, and help reduce the country’s growing trade deficit which widened to 1.8 billion US dollars in the first half of this year.

Saying that sacrifices had to be made to bring the economy back to a strong growth mode, Chinamasa also hiked the duty on imports of second hand cars, sugar, fertilizer, pharmaceutical products, carbonated drinks and several other “unnecessary imports”.

It is estimated the country had been spending more than 600 million USD a year on second-hand car imports, mainly from Japan, while local car manufacturing companies stood largely idle.

In order to encourage increased local production, in anticipation of a drop in imports after the bans and tax hikes, the finance minister also slashed utility charges for farmers and industry. The country’s economy is agro-based, and the sector’s health automatically filters through to the entire economy.

Chinamasa said the economy had recorded modest growth in the first half of the year, but would fail to attain the original Gross Domestic Product target of 3.2 per cent by year-end. He blamed drought during the last planting season, sluggish international COMMODITY PRICES and the constrictions which the manufacturing, tourism and construction sectors also faced for the slower growth.

“Consequently, economic growth is now expected to decelerate to below the original target (of 3.2 per cent),” added Chinamasa, who revised the 2015 national budget down to 3.6 billion USD from 3.9 billion USD, and hinted at possible job cuts in the civil service as a result.

Chinamasa said the government wanted the salary bill, currently eating up 83 per cent of government revenues, brought down to around 40 per cent of the total. “Cabinet will be considering full proposals (on reducing the government wage bill) in the next few weeks,” he said, adding that the Civil Service Commission (CSC) had already completed a headcount.

Estimates put the number of government employees at more than 250,000 although the CSC is yet to reveal the final figures.Chinamasa said funding that will be saved from the wage bill will be used for developmental purposes.

He said the tax incentives and penalties, which take effect from September, should drive up manufacturing sector growth to 1.6 per cent from the earlier projected 1.2 per cent.

The finance minister said it was imperative that unproductive habits be broken to achieve targeted growth and prosperity. “In order to achieve a turnaround in the fortunes of our economy, the clarion call should be production, production and more production. There is no other way, there are no shortcuts either.”

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