Accessibility links

Breaking News

MDC Describes As Toxic Concoction Treasury’s Fiscal Measures Proposing Fee Increase in Electronic Transactions


FILE: Zimbabweans compare the new note with the U.S. dollar note following the introduction of new notes by the Reserve Bank of Zimbabwe in Harare, Nov, 28, 2016.

The Movement for Democratic Change (MDC) led by Nelson Chamisa has described as “daylight robbery” moves by Treasury to increase charges on electronic money transactions saying it will fuel the black market.

In a statement, the MDC said, “Yesterday Zanu PF sharpened the robber state. A shameless announcement of raft meant to pick-pocket the poor in a bid to fund the lifestyles of the political elites. Firstly the charges announced yesterday on electronic transactions in an attempt to create fiscal legroom for treasury are just but day light robbery.

“They are an encouragement for creative transactions and fuel for black market. The citizens will just reject spheres accessible to the state and reorganize themselves in autonomous spaces dealing a serious blow on revenue collection.”

The MDC said Zanu PF “can't be the one to punish electronic transactions when they have been celebrating a cashless economy.”

The opposition party said, “As a matter of fact notes and coins contribute a paltry 2% of broad money supply as per official statistics from both the Treasury and the RBZ. More importantly this is a war being declared on a particular class of Zimbabwe, the working people.

“In the monetary policy statement, it is clear that only the working people are going to lose value. The ‘know your client’ principle referred will affect mostly the poor who have not earned value from international sources in a long time.”

Treasury introduced the Intermediated Money Transfer Tax with effect from 1 January 2003 through the Finance Act 15 of 2002. The tax was set at 5 cents per transaction, which was a specific tax.

However, Finance Minister Mthuli Ncube said due to an increase in informalisation of the economy and huge increase in electronic and mobile phone based financial transactions and RTGS transactions there was need to expand the tax collection base and ensure that the tax collection points are aligned with electronic mobile payment transactions and RTGS system.

He said in 2018, 1.7 billion transactions went through as compared to 50 million four years ago.

“I hereby review the Intermediated Money Transfer Tax from 5 cents per transaction to 2 cents per dollar transacted, effective 1 October 2018. I am therefore directing financial institutions, banks and ZIMRA, working together with telecommunication companies to extend the collection to all electronic financial transactions.

The MDC also said it was senseless for foreigners to pay for services in Zimbabwe in foreign currencies.

“… Then comes the insanity around foreigners paying for services in forex, this is an unenforceable insanity. The gentlemen (Reserve Bank John Mangudya and Ncube) are probably intoxicated by a high grade of Indian hemp so potent that it needs to be protected by a patent. This creates a whole lot of problems including the introduction of middlemen in purchases of basic goods.

“We have always stated that the bond note must be repealed, that would be the end of story. The move to create two types of accounts borders on illegality, such acts must never happen in a democratic society. The government is introducing a new currency through the back door in violation of the RBZ Act with all its flaws. The government has demonstrated capacity to raid accounts whenever they are desperate, they will at some point raid the NOSTRO accounts. As of now even by Ncube’s confirmation RBZ net claims against the government have exceeded the legislated limit by more than 300%.”

Treasury has also noted that it would stop the issuance of Treasury Bills saying they were draining the national fiscus.

On this issue, the MDC said, “Ncube even states that the government will not stop issuing toxic treasury bills, he instead modifies them and tries to bring in an auction element which will not curtail government spending.

The party said these measures are half backed and as a result the ruling party should use its economic blue print contained in its SMART policy document.

It says they should be fiscal consolidation by pursuing of a primary balance and restoration of balanced budgeting, rationalisation of expenditure and improving the expenditure mix, building capacity on revenue management and strengthening public finance management systems and taking measures to reduce debt and improving debt management to reduce the risk of inflationary pressures, crowding out of private sector activity and exacerbation of liquidity shortages.”

It said other measures include expediting State Owned Enterprise (SOE) Reform, rationalisation of the public service and elimination of ghost workers to reduce employment cost to 30% of total expenditure, expansion of the revenue base through increased productivity, and expansion of the economy and immediate resolution of the cash crisis by addressing confidence issues, scrapping the bond note, strengthening the multiple currency regime.

It has also proposed reforms at the central bank, accelerate “ease of doing business” reforms and promote policy coherence and consistency, commencement of urgent debt resolution and re-engagement processes, convening the second Zimbabwe Conference on Reconstruction and Development and several other issues.

“These are the measures that will arrest ballooning deficits which are being funded through toxic means creating both a cash shortage and crowding out the private sector. These measures will also increase productivity while expanding the tax base without overburdening the working masses of Zimbabwe.”

Mangudya said Zimbabwe’s economy is expected to grow in excess of 5 percent while Ncube put it at 6.3%.

Ncube said at the centre of the country’s challenges, is the unsustainable high budget deficit, which has destabilising implications not only to the financial sector but to the rest of the economy.

“The financing of the deficit was mainly through domestic borrowing with the use of instruments such as Treasury bills, overdraft with the Central Bank, cash advances from Central Bank, arrears and loans from the private sector. Such financing mechanisms is crowding out the private sector, hence constraining production. This also increased money supply in the economy translating into exchange rate misalignment and inflationary pressures now at 4.9%, as at August 2018.”

Ncube noted that the high deficit has ignited expansion of domestic debt from US$275.8 million in 2012 to current levels of US$9.5 billion against US$7.4 billion external debt, bringing the total public debt to US$16.9 billion.

The overdraft with the central bank stands at US$2.3 billion, as at end of August 2018, well above the statutory limit of US$762.8 million.

Facebook Forum

XS
SM
MD
LG