Harare (New Ziana) – Zimbabwe will need a supplementary budget of ZW$929 billion for the remainder of the year to cater for increased expenditure caused mainly by rising employment costs and budgeted national programmes, Finance and Economic Development Minister Mthuli Ncube said on Thursday.
Presenting the mid-term budget and economic review and a supplementary budget, Ncube said fiscal developments during the first half of the year, characterised by increasing expenditure pressures, had necessitated the revision of the approved 2022 National Budget.
“The revision is necessary to allow spending agencies meet increasing costs of undertaking originally budgeted programmes and projects that will ensure the 2022 objectives are met.
“Revenue collections to year end are now projected at ZWL$1.7 trillion, while expenditures are now estimated at ZWL$1.9 trillion. This is against the approved Budget of ZWL$968.3 billion, entailing additional spending of ZWL$929 billion,” he said.
“The bulk of the supplementary budget (53 percent) was going towards employment costs to cushion public servants against the increasing cost of living. The balance of the additional resources are going towards meeting government consumables (18 percent), capital projects (19 percent) and social benefits (7 percent).”
Ncube said government was committed to addressing the welfare of civil servants in a fiscally sustainable manner.
“The challenges of yester-year where the wage bill crowded out other development expenditures should be avoided in order to create the right conditions for sustainable economic growth that will provide scope for payment of decent salaries to our hard-working workers. We are stepping up provision of non-monetary incentives to improve their welfare,” he said.
The Ministries of Lands, Agriculture, Fisheries, Water and Rural Development and Primary and Secondary Education are receiving the largest top-up from the additional budget resources at ZW$100.7 billion and ZW$103.9 billion respectively.
“On agriculture, the resources are earmarked for grain procurement, preparations for the forthcoming season and dam construction,” he said.
In terms of revenue enhancing measures, Ncube said despite the significant contribution to output and export receipts, the mining sector contributed about 1.2 percent of GDP in direct taxes to the Fiscus in 2021.
This, he said, was a significant contrast to countries in sub-Saharan Africa which averaged 2 percent during the same period.
As such, he said new levies would apply for platinum and lithium miners.
“Low fiscal receipts are attributed in part to a generous royalty regime on some major minerals. A case in point is the royalty rate on platinum, which was reduced from 10 percent in 2015 to 2.5 percent in conformity with a court judgement.
“The reduced rate was subsequently aligned across all platinum producers. Compared to revenues accruing from mining activities and rates charged on other precious minerals and metals such as gold, the royalty rate on platinum is sub-optimum. For example, royalty rates on gold range from 3 to 5 percent, depending on the international commodity price,” he said.
“Mindful of the fact that the tax regime is the main instrument for sharing benefits from finite minerals and also provides an important source of government revenue, it is necessary to maximise revenue to the Fiscus. A royalty rate of 5 percent, which is in line with other platinum producing countries in Africa, is proposed effective 1 January 2023. The royalty rate of 5 percent will also apply on lithium with effect from 1 January 2023.”
On tax relief measures, Ncube reviewed the tax-free threshold on local currency remuneration from ZWL$300 000 to ZWL$600 000 per annum and also adjusted the tax bands to end at ZWL$12 million from the current ZWL$6 000 000 per annum, above which tax will be levied at a rate of 40 percent, with effect from 1 August 2022.
“This measure is envisaged to increase disposable income, spur consumption spending and income for corporates. I also propose to review the local currency tax-free bonus threshold from ZWL$100 000 to ZWL$500 000, with effect from 1 November 2022,” he said.