By Daniel Chigundu
Finance Minister Mthuli Ncube says “Austerity for Prosperity” is targeted at government alone and does not extend to the private sector and individuals.
Austerity for Prosperity is the theme for the 2019 National Budget presented by Minister Ncube and which has generally been criticised by some economists and politicians who believe it is not pro-poor.
The budget theme is widely known for bringing the infamous 2% transactional tax to the economy at a time when people are already struggling to make a meaningful living due to a cocktail of challenges in the economy.
Giving oral evidence to the Parliamentary Portfolio Committee on Budget and Finance, Minister Ncube said austerity sought to reduce government expenditure and to raise more revenue and has nothing to do with the private sector.
“Austerity really was driven by the fact that we had a double-digit budget deficit to GDP ratio last year and the previous years it was also high so we needed to bring it to single digit levels and we had a target in the budget as you recall of 5%.
“So austerity meant that we had to cut back on expenditure, raise revenues to a point where we are able to reduce budget deficit to 5%, that is what it pertains to of course what we had to do was to signal seriousness as government by requesting that the executives at least in terms of President, Vice president, the ministers, deputies, heads of parastatal reduce their salaries by 5% to show that they are committed to the issue of containing expenditure of government and they did that and we approved that in the budget.
“That is what austerity really meant in terms of expenditure side of things, in terms of revenue raising we have made some adjustments, for example, we introduced the 2% tax as ways to raise additional revenues and it has come in very handy indeed and has allowed us to meet the impact of the reforms head-on in terms of extra revenues that are needed to pay for shocks in the economy, for example, the weather impact Cyclone Idai and also the reforms themselves.
“So that is what austerity really meant it really pertains to government expenditure, government behaviour and the state of government finances as we go forward not the private sector,” he said.
The Finance Minister also added that “of course companies can instate their own austerity measures in terms of their own strategies as companies that is their decision so as to remain profitable and protect shareholder value”.