Zimbabweans are facing a potential increase in the price of bread, a staple food for many, as the government’s new value-added tax (VAT) policy takes effect from January 1, 2024. The policy, announced by Finance Minister Mthuli Ncube in his 2023 budget, removes the VAT exemption for basic food commodities such as maize meal, wheat flour, bread, and salt, and imposes a 15% VAT on them.
According to the Grain Millers Association of Zimbabwe (GMAZ), the largest representative body of the milling industry, this could result in a bread price of US$2 per loaf, up from the current US$1, as retailers will round up the price and force consumers to buy other small items. GMAZ President Tafadzwa Musarara said the policy would threaten food security at the household level, as many poor Zimbabweans rely on these commodities for their sustenance.
Musarara also said the policy contradicted the government’s own National Development Strategy 1 (NDS1), which aims to achieve food self-sufficiency and reduce poverty by 2025. He urged the government to reconsider the policy and restore the VAT exemption for these basic food commodities.
The government, however, defended the policy as a necessary measure to increase revenue and reduce the budget deficit, which is projected to be 1.5% of GDP in 2023. Ncube said the policy would also align Zimbabwe’s VAT system with regional and international best practices, as most countries do not exempt basic food commodities from VAT.
He added that the policy would not affect the poor, as they would benefit from targeted social protection programs, such as cash transfers, food aid, and subsidies. He also said the government would monitor the prices of basic commodities and intervene if necessary to prevent profiteering and speculation.
The policy has been met with mixed reactions from the public and other stakeholders. Some have welcomed it as a positive step towards fiscal consolidation and economic stability, while others have criticized it as a regressive and anti-poor move that would worsen the already high cost of living and inflation in the country.
Zimbabwe has been struggling with a volatile macroeconomic environment, characterized by currency depreciation, high inflation, low productivity, and chronic shortages of foreign currency, fuel, and electricity. The country also faces multiple shocks, such as the COVID-19 pandemic, drought, cyclones, and sanctions, that have adversely affected its economic and social development.
The World Bank estimates that Zimbabwe’s real GDP contracted by 8% in 2020, and projects a modest recovery of 3.9% in 2021 and 5.1% in 2022, subject to the implementation of sound policies and reforms. The bank also warns that the country remains highly vulnerable to external and domestic risks and that poverty and food insecurity are likely to remain elevated in the near term.
Despite these challenges, the government and its partners are working to address the country’s economic and humanitarian needs and to create a conducive environment for inclusive and sustainable growth. The government has launched several initiatives, such as the NDS1, the Transitional Stabilisation Programme (TSP), and the Zimbabwe Economic Recovery and Reform Plan (ZERRP), to restore macroeconomic stability, improve public service delivery, and promote private sector development.
The international community has also provided significant support to Zimbabwe, especially in the areas of health, education, agriculture, and social protection. According to the UN, the humanitarian response plan for Zimbabwe in 2020 received US$ 301.8 million, or 64.5% of the required funding, from various donors. The plan for 2021, which targets 6.7 million people in need of assistance, requires US$ 331.5 million.
As Zimbabwe enters a new year, many hope that the government’s new VAT policy will not undermine its efforts to achieve economic recovery and social welfare and that the country will overcome its difficulties and realize its potential.
Source: Bulawayo24 News
