Golden Sibanda-Senior Business Reporter
Zimbabwe’s economy is doing well with growth prospects strong and on track, despite the stalking shadow of Covid-19, leading Finance and Economic Development Minister Mthuli Ncube yesterday upgrading the projected growth this year from the initial 7,4 percent to 7,8 percent.
This strong economic growth trajectory this year is anticipated to spill over into the forthcoming year, with Minister Ncube projecting another 5,4 percent growth.
This year’s growth includes a recovery component while next year’s comes on top of a high-growth year.
Zimbabwe’s economy is also expected to outperform its regional peers, with the sub-Saharan Africa forecast to grow by a modest 3,4 percent this year, a slight upward review from the initial projection of 3,1 percent.
Presenting the Midyear Budget Review to Parliament, Minister Ncube said the economy would grow faster this year driven by strong agricultural output, a global commodity price boom, stable economic conditions and the Government-spearheaded Covid-19 response.
The actual budget of Government spending saw a projected deficit of $7,7 billion in the first six months of this year turn into a budget surplus of $507 million thanks to extra revenue of just over $16 billion, part of which was used to hire more nurses and teachers.
He saw no need for changes in policy, so there were no new taxes or tax concessions but just a commitment to carry on.
The Finance Minister projected strong growth in agriculture, electricity generation, accommodation and food sectors, as well as financial services.
Building on the momentum of the current year, Minister Ncube said the economy would grow by around 5,4 percent in 2022, anchored on growth in sectors such as mining, manufacturing, electricity generation, among others.
This economic growth target is consistent with the attainment of Vision 2030 of an upper middle-income status by 2030 and meeting the targets of the Sustainable Development Goals (SDGs).
It was critical to stay the course of obtaining growth momentum and stability, with current policies yielding desired results, hence he left any tinkering with policies to the 2022 national budget.
Minister Ncube said in light of the current strong economic growth trajectory, it was critical to focus on building resilience and recovery of the economy in the middle of the Covid-19 storm.
“Mr Speaker Sir, the domestic GDP growth for the year 2021 is projected to remain strong at 7,8 percent, slightly above the 2021 National Budget growth forecast of 7,4 percent,” Minister Ncube said.
In view of the persistent Covid-19 pandemic, which has seen an upsurge in positive cases, he said intensive vaccination remained unavoidable and the long-term solution to save lives and livelihoods, using the savings from last year to buy the vaccines.
To date, the Finance Minister said, the Government had spent US$93,2 million on vaccines alone out of the US$100 million set aside for vaccine acquisition.
But Minister Ncube reckoned, it will be critical to mobilise additional resources to take the programme further with an eye on attaining herd immunity, which will be critical precondition to relax or remove Covid-19 restrictions and fully open up the economy.
“The Covid-19 response measures, coupled with the vaccination exercise currently underway globally and domestically, continue to give hope to the sustained economic recovery,” Minister Ncube said.
Quoting author and behavioural scientist Steve Maraboli, Minister Ncube said: Life doesn’t get easier or more forgiving; we get stronger and more resilient. Therefore, let’s focus on building resilience and recovery of the economy in the middle of this Covid- 19 storm.”
Breaking down the economic performance for the past six months, Minister Ncube said fiscal and monetary consolidation had managed to push back inflation, which fell from an annual rate of 837,5 percent in July last year to an annual rate of 56,37 percent this month.
“Month-on-month inflation is expected to remain stable at less than 3 percent during the second half of 2021. Consequently, annual inflation is expected to decline further by end August 2021 and further to between 22 percent and 35 percent by December 2021,” he said.
The Reserve Bank of Zimbabwe continued to implement the monetary targeting framework which balances the need to sustainably anchor inflation expectations and simultaneously provide appropriate levels of liquidity in support of economic activity.
“The monetary targeting framework has helped to contain money supply growth, which in turn has stabilised the exchange rate and eased inflationary pressures in the economy,” the minister said.
The 2021 national budget had been premised on revenue projections of $390,8 billion (16,4 percent of GDP) and expenditures of $421,6 billion (18,2 percent of GDP) with a targeted budget deficit of $30,8 billion. But Zimbabwe did better.
Click on the link below to read the full Budget Review Statement.
The first half year budget execution indicated continued dividends from the fiscal consolidation measures being pursued since the Transitional Stabilisation Programme so cumulative revenue collections for January to June this year amounted to $198,2 billion against a target of $182,1 billion, resulting in an extra $16 billion or 8,8 percent.
This positive performance was attributed to both extra tax revenue of 5,3 percent and extra revenue from non-tax sources, mainly ministry service fees, which almost quintupled rising by 392 percent as cost-recovery fees were set.
Overall, expenditures during these six months was able to rise as a result and stood at $197,6 billion, implying expenditures were above the half year target of $189,8 billion by $7,8 billion.
“As a result, expenditure on Government programmes during the period under review, was 41 percent of total budget against a half year target of 45 percent,” Minister Ncube said.
The minister said major expenditures were on compensation of employees at $80 billion against a target of $73,8 billion and non-financial assets (capital budget) at $67,4 billion against a target of $58 billion.
The extra staff costs arose from the hiring of more health staff and more teachers and the January and April salary reviews.
In terms of capital programmes, the minister said, financial resources were disbursed mainly towards the completion of ongoing works, as well as sustaining works on projects at advanced stages of completion.
Devolution resources facilitated implementation of various projects across the country in areas of health, education, roads, water and sanitation.
Social benefits cost $14,5 billion against a budget of $6,1 billion and subsidies cost $2,9 billion, against the budget of $1,4 billion but these extra costs, largely due to Covid-19 and the lockdowns, were paid through reallocations.
Spending has remained within the budget that has resulted in improved public finances while managing the budget deficit, and hence, the public debt within sustainable levels.
“In the outlook to December 2021, budget expenditure target of $421,6 billion will be maintained as we try to contain expenditures, save for exigencies managed through reallocations, where necessary,” he said.
Zimbabwe’s external sector position, Minister Ncube noted, has remained strong in support of the country’s balance of payments requirements, as well as stabilising the exchange rate.
He said the current account balance for 2021 was projected to remain in surplus, that is the amount of foreign currency flowing in would exceed the amount flowing out, albeit at a moderate level of US$611,6 million, from US$1,096 billion in 2020.
He was expecting a small trade deficit of around 2 percent as productive sectors imported more machinery and raw materials as they expanded, but with this easily offset by diaspora remittances more than doubling and other payments.
Minister Ncube said the banking sector remained adequately capitalised, with aggregate core capital of $64,21 billion as at March 31, 2021, an increase of 20,74 percent, from $53,18 billion from December 31, 2020.
Exports are projected to increase by 4,2 percent, from US$4 931,9 million in 2020 to US$5 139,8 million in 2021.
Mineral exports are expected to maintain strong growth driven by platinum group metals, chrome and carbon ferrochrome.
Imports are also projected to increase by 11,1 percent to reach US$5 245,7 million in 2021, from US$4 719,9 million in 2020, driven by increases in fuel, machinery and raw material imports, the Treasury chief said.
He said between January and June 2021, Zimbabwe received US$746,9 million in Diaspora remittances compared to US$288,7 million in the same period last year. The inflows are projected to close the year around US$1,3 billion.