Mid-Year Budget Statement Is Nonevent

UNCLAS HARARE 001281 SIPDIS STATE FOR AF/S USDOC FOR AMANDA HILLIGAS TREASURY FOR OREN WYCHE-SHAW PASS USTR FLORIZELLE LISER STATE PASS USAID FOR MARJORIE COPSON ¶E. O. 12958: N/A TAGS: ECON EAID EAGR EINV PGOV ZI SUBJECT: Mid-Year Budget Statement Is Nonevent ¶1. Summary: Acting Finance Minister Herbert Murerwa's mid- year speech offered neither recognition of Zimbabwe's exporter crisis nor innovative prescriptions. Once again, the beleaguered Finance Ministry has punted the ball to Reserve Bank Governor Gideon Gono. End summary. Adjustment for Bracket Creep -------------- ¶2. For ordinary Zimbabweans, the only noteworthy aspect of Murerwa's statement was his elevation of income tax brackets, a semiannual ritual in this high-inflation environment. The GOZ's Herald led today with this item under the overextended headline, "Non-Taxable Income Up." The GOZ raised the low bracket threshold from Z$ 200,000 to 750,000/month (US$37-140) and the high bracket threshold from Z$375,000 to 1,500,000/month (US$70-280). Although Murerwa and the Herald vaguely characterized the adjustment as tax relief, it merely accounts for inflationary bracket creep since December. Additionally, the GOZ tinkered with duty on a few imports, most notably lowering or removing taxes on commercial or public transport vehicles. Murerwa made only timid references to fiscal restraint, probably too little to satisfy the markets. Comment -------------- ¶3. Speaking obliquely and often in passive voice, Murerwa further toed the GOZ line by implying Zimbabwean exports were increasing (measures "are greatly improving viability and capacity to export") and the GOZ was paying down its arrears to international lending bodies ("some payments are being made"). Still, Murerwa and the Finance Ministry professional staff obviously realize a) inflationary bracket realignment is not tax relief, b) exports are falling rapidly, and c) recent GOZ payments to the International Monetary Fund are insignificant. Yet Murerwa, who has served twice as Finance Minister, is unwilling to help Zimbabweans confront uncomfortable facts. We will see if Gono is more up to the task when he delivers his monetary policy update. Weisenfeld