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Brief analysis of the 2012 Mid-Term Policy Review statement
Southern African Parliamentary Support Trust
July 23, 2012

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1. Introduction and Background

The Honourable Minister of Finance, Tendai Biti, presented the 2012 Mid-Term Fiscal Policy Review Statement to Parliament on the 18th of July, 2012. The Fiscal Policy was issued against a background of deteriorating domestic conditions, characterised by weak agriculture production, below par revenue collections, (on account of underperformance in the diamond sector), as well as weakening global economic conditions. The economy is therefore project to slow down by 40% from an optimistic 2012 Budget projection of 9.4% to 5.4%.

The minister has thus recast his 2012 Budget theme from "Sustaining Efficient and Inclusive Growth with jobs," to a more modest and compromise tone, that is "From Crisis to Austerity: Getting back to Basics". This tone follows a no holds barred engagement of Cabinet on the 14th of June, 2012 at a Special Cabinet Meeting called specifically to deal with the economic situation in the country.

2. Highlights of the Fiscal Policy Review

  • Economy to slow down by 42% from earlier optimistic projections of 9.4% to 5.4%;
  • Agriculture to drastically slow down from a 2010 bullish high growth rate of 33.9% to -5.8% heightening fears of food insecurity;
  • Budget revised downward by 9% to US$3.64 billion from an optimistic 2012 Budget projection of US$4 billion, necessitating re-prioritisation of Votes;
  • Revenue projections recast from US$4billion to US$3.64 to match expenditure, owing to weak collections;
  • Half year revenue collections of US$1.565 billion against budget target of US$1.838 billion, yielding a variance of US$244.2 million.
  • Diamond revenue remittances at US$49 million, account for 93.8% (US$229.3 million), of revenue variance. - Budget cut back forces Treasury to re-prioritise expenditures, sacrificing capital and operational budgets.
  • Non wage related Recurrent Expenditure (operational and maintenance) at US$217.9 million against budget target of US$919 million, implying an under - expenditure of 47%, yet wage bill stands out at 70% of budget against target of 53%.
  • Target disbursements to Social sectors at US$36 million against budget target of US$122.7 million, yet foreign travel chewed up US$156 million.
  • Excise duty on diesel and petrol increased from 16 cents per litre and 20 cents/litre respectively to 20 cents per litre and 25 cents per litre.
  • Public Finance Management Act Regulations to be gazetted;
  • Constitution ready and Treasury commits to fund Stakeholder Workshop and Referendum.

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