500 is the number as Mthuli Ncube introduces grand price hikes

Harare – Finance Minister, Professor Mthuli Ncube on Thursday presented the 2019 mid-term budget and as has been the case over the past in relation to government policies, it did not lack surprises and is now a subject of contention among academic discussions as well as in the court of public opinions.

The mid-term budget saw an increase in government service charges which again invokes questions regards the essence of the recent introduction of the Zimbabwean dollar subsequent to the scrapping of the multi-currency regime over which government claimed was a move aimed at stabilising inflation and the exchange rate.

Evidently, as the market is battling factors such as lack of confidence, both inflation and exchange rates continued on an upward trend, particularly the jump in interbank market rates proving government’s failure to effect positive changes through its policy pronouncements.

The number 500? Well this points to the five-fold increase in vehicle license fees and toll gate fees, in addition to an average of a 300% hike in electricity tariffs.

Finance Minister yesterday raised toll gate fees as follows: light motor vehicles are now paying $10 up from $2, mini buses $15, buses $20, heavy vehicles $25 and an increase to $50 for haulage trucks.

In addition, vehicles license fees have been increased from $20 to $100 covering a four months period for vehicles of a net mass up to 1500kg while license fees for vehicles of other different net mass was also revised upwards, accordingly.

The increase in vehicle license fees and toll gate fees sparks fear among the public that the already biting transportation cost is going to increase, adding on to the effects of a series of fuel price hikes.

The high margins in the increase of government’s service charges dispel any argument over the value of the ZW$ against regional currencies. Government, and indeed the head of state, President Emmerson Mnangagwa is on record saying Zimbabwe has the strongest currency in the region.

The raft of measures introduced by the Finance Minister indicates admittance that the local currency is deteriorating in value and points to the intention to catch up with the existing exchange rates.

In his own words the Minister said, “Since the introduction of an interbank for foreign exchange rate, the local currency has lost value against major currencies.”

It is however not certain if the exchange rates have stabilised for the long term particularly on the interbank market which is in pursuit of convergence with the parallel exchange market.

In a proper setup, well-designed charges and fees not only reduce the need for additional revenue sources, but promote service efficiency. But for all the good intentions the Finance Minister maybe pursuing, Zimbabwe is crippled with corruption and poor service delivery, which despite the recent increase in service charges may prove to be the stumbling block in the proper allocation and usage of revenue the government is going to pocket.

In a typical fashion, the ruling party legislators were cheering as Professor Ncube went through his budget presentation, but on the other hand some have criticised the budget as piling further misery on average citizens.

The increase in electricity tariffs and services charges will likely further rob into the already poor incomes of many citizens while government and various workers groups are far from reaching consensus over review in salary hikes.

Other key notes from the interim budget include the suspension of year on year inflation reporting by ZIMSTAT to February 2019. Ncube said the reason behind this is the difference in the basis of the price figures.

Inflation reported by ZIMSTAT lately was a subject of contention especially among academics, with critics accusing the statistics agency of under-reporting inflation.

In addition, government adjusted the Intermediated Money Transfer Tax (IMTT) which will now be effect from a minimum of $20 from the initial $10.

In one of the positive highlights of the budget, the tax free threshold was increased from ZWL$350 to ZWL$700 per month while solar batteries are now tax-free in consideration of the current energy challenges.

The Minister announced that the importation of lithium-ion batteries would now be duty free.

Equity Axis News

Raynold Mhotseka

Raynold Mhotseka is a Journalism and Media Studies student at the University of Zimbabwe. He serves as a news writer at financial research firm, Equity Axis where he is currently on attachment. He can be contacted through the following email links, rayjnr.mhotseka@gmail.com and raynoldm@equityaxis.net.

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