IN his Mid Term Fiscal Policy Review statement yesterday, Finance and Economic Development Minister, Professor Mthuli Ncube, said going forward, focus would be on consolidating the stability achieved so far by maintaining tight fiscal and monetary policies, while implementing measures to restore aggregate demand.
Africa Moyo-Deputy News Editor
Zimbabwe’s economy is on the right track, and is expected to grow by 5,3 percent this year, with macro-economic stability set to continue driven by “recent bold interventions” that shut out all sources of excess liquidity, provided stronger financial regulation and the enforcement of value for money in Government contracts.
In his Mid Term Fiscal Policy Review statement yesterday, Finance and Economic Development Minister, Professor Mthuli Ncube, said going forward, focus would be on consolidating the stability achieved so far by maintaining tight fiscal and monetary policies, while implementing measures to restore aggregate demand.
Fiscal policy centres on Government budgeting and spending, but the review needs to give the full economic background.
The Zimbabwe National Statistical Agency (ZimStat) estimates that economic growth during the first quarter of 2023 was at an annualised 6,2 percent, and 6,5 percent for the year 2022.
Prof Ncube said such growth rates put Zimbabwe among the fastest growing economies in Africa.
The upwardly revised projected growth of 5,3 percent in 2023 is on account of strong performance in agriculture 9,7 percent, ICT 4,9 percent, accommodation and food services 20,5 percent, as well as substantial improvements in the electricity supply situation, following the successful synchronisation and subsequent commercialisation of Hwange’s Units 7 and 8.
Units 7 and 8 have added 600MW to the national grid, almost eliminating load shedding across the country.
Agriculture, initially projected to grow by 4 percent in 2023, is now projected to grow by 9,7 percent.
Cereal production, excluding the winter wheat crop, is estimated at 2,6 million tonnes for 2023, which is 40 percent above the production levels achieved last year.
In mining, which has seen new companies joining in and old ones expanding operations, growth is now projected at 4,8 percent this year, benefiting from increases in the production of lithium, chrome, diamonds and platinum group metals.
The manufacturing sector is expected to grow by 2,2 percent in 2023, driven by a better agricultural season and measures being implemented by Government to tame inflation and exchange rate volatility.
Prof Ncube said weighted annual inflation was generally slowing down during the year until May when prices increased substantially giving a annual rate in June of 175,8 percent.
However, prices have started declining with month-on-month inflation for July at -15,3 percent, while year-on-year fell to 101,3 percent. Inflation is expected to continue to falling in response to a raft of measures implemented by Government in May and June to instil confidence, strengthen demand for the local currency, and foster market discipline.
Prof Ncube also said Zimbabwe’s merchandise exports slightly weakened by 1,9 percent to US$2,59 billion during the first five months of the year to May, weighed down by declining exports for platinum group metals and gold. Mineral exports are included in the merchandise exports.
Up to year end, merchandise exports are expected to grow by 3,5 percent this year.
Imports increased by 7,4 percent to US$3,6 billion during the first five months, mainly driven by an increase in fuel, machinery, motor vehicles, and electricity imports.
Up to year end, merchandise imports are projected to grow by 1,4 percent to US$8,8 billion. Preliminary indications show that the current account balance narrowed to a surplus of US$38,3 million in the first half and is expected to remain in surplus by year end.
Prof Ncube said sound public finance management in the first half ensured a healthy fiscal position, which was important in engendering economic stability.
Preliminary cumulative revenue collections from January to June amounted to $4,3 trillion, against expenditures of $3,7 trillion, resulting in a budget surplus of $608,5 billion.
“With this performance, the Budget remains on course to achieve the desired fiscal deficit target of 1,5 percent of GDP by year end,” said Prof Ncube.
VAT contributed 26,5 percent of total revenue, personal income tax 19 percent, corporate income tax 14,7 percent, excise duty 12,6 percent, customs duty 7 percent and IMTT 6,7 percent.
Major expenditures were on compensation of employees $1,4 trillion, operations $2,9 trillion and capital $747,5 billion.
To cushion the vulnerable, Government disbursed $48,2 billion for social protection programmes during the first half of the year, towards BEAM $36,1 billion, drought mitigation $6 billion, and harmonised cash transfers $3,2 billion, among others.
Turning to the health sector, Prof Ncube said during the period under review, resources amounting to $248,2 billion were channelled towards employment cost, drugs, medical supplies and equipment, as well as health infrastructure covering construction, rehabilitation and upgrading of health facilities including procurement of medical equipment.
“In addition, an amount of US$12,6 million was availed during the first half of the year towards the Zimbabwe Health Facilities Programme being implemented by the NMS Company,” he said.
Towards the education sector, Government channelled $511,9 billion during the first six months towards Primary and Secondary Education, and Higher and Tertiary Education.
Support was generally skewed towards wage costs for teaching and non-teaching staff, said Prof Ncube.
On infrastructure development, $478 billion was availed from January to June towards infrastructure development projects including Intergovernmental Fiscal Transfers.
Road Development got $180 billion mainly towards the Harare-Masvingo-Beitbridge road, enabling completion of 450km.
In terms of water and sanitation, $48,5 billion was provided towards dam projects, which facilitated the completion of Chivhu Dam that was commissioned in June.
A further $9,75 billion was provided towards borehole drilling under the Rural Development Programme.
Housing development got $49,3 billion towards construction and development of stands for both residential and institutional accommodation.
Prof Ncube said $74 billion has so far been disbursed under the Inter-Governmental Fiscal Transfers to local tiers of Government, the devolution policy, mainly targeting construction of social infrastructure and the procurement of equipment, including fire engines for all the 92 local authorities.
In terms of debt financing, Government mobilised $191,6 billion through Treasury bills, and was mainly channelled towards liquidation of maturing Treasury bills and bonds worth $144,2 billion, as well as external debt payments amounting to US$28,2 million, during the first half of 2023.
During the first quarter of 2023, development partners disbursed US$151,9 million, which went towards some of the following sectors; health 60 percent, humanitarian assistance 14,8 percent, agriculture 10 percent, governance 8,3 percent and education 3,2 percent.
With a lot of positives happening in the first half of the year, Prof Ncube said the implementation of the 2023 national Budget remains on course, despite the exchange rate and inflation volatility experienced during the first half of the year.
He said it is critical that all stakeholders work together with Government to achieve the growth and stability objectives of the National Development Strategy, by embracing the local currency as the legal tender, ending speculative/forward pricing tendencies and observation of Exchange Control regulations.
“This, combined with other structural reforms underway, creates the necessary conditions for currency stability,” he said.
“The attainment of durable macroeconomic stability, combined with improved electricity supply situation is expected to spur economic growth above the projected 5,3 percent in 2023.
“This is important as it improves the capacity of the Budget to meet some of the emerging inescapable expenditures during the last half of 2023.”
The 2023 national Budget is running under the theme, “Accelerating Economic Transformation”, was designed to support economic transformation and growth, through promotion of value addition, diversification and improving the doing business environment to enhance the economy’s resilience, competitiveness and productivity.
