Zimbabwe Economy Set to Grow by 5.5% in 2022

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HARARE – Zimbabwe’s Finance Minister says the country’s economy is projected to grow by 5.4 percent next year.

Presenting the 2022 national budget in parliament today. Ncube said, “Domestic GDP growth for 2021 is estimated to remain strong at 7.8%, mainly on account of the good 2020/21 agriculture season, higher international mineral commodity prices, stabilising macroeconomic environment, and better management of the COVID-19 pandemic.

“In 2022, the economy is projected to grow by 5.5%, underpinned by higher output in mining, manufacturing, agriculture, construction, as well as accommodation and food services (tourism) sector. The 2022 growth projection is, however, subject to risks relating to the future path of the pandemic and its impact on key sectors of the economy.”

Ncube said annual inflation was on a downward path during the greater part of the year to 54.5% as at October 2021 compared to 471.3% recorded during the same period last year, underpinned by a tight fiscal and monetary stance.

“However, the parallel market premiums and market indiscipline always present challenges on efforts of containing inflation. the Central Bank is implementing a three-pronged policy approach of conservative monetary targeting framework, supported by prudent management of the exchange rate through the auction system, as well as measures to maintain and sustain the current financial sector stability.”

He noted that going forward, the conservative monetary targeting framework will be strengthened to ensure that money supply in the economy is maintained at levels consistent with the economic growth and inflation targets and in line with the national budget assumptions and 2022 macro-economic projections.

Ncube said the state of the country’s public finances are sound and consistent with the 2021 budget objectives and targets.

He said revenue collections during the first nine months to September 2021 amounted to ZW$317.4 billion against a projection of ZW$291.5 billion, resulting in a positive variance of ZW$25.8 billion (8.9%), and are now expected to reach ZW$495.01 billion (16.6% of GDP) by December 31, 2021.

Total expenditures for the same period amounted to ZWL$351.7 billion against a target of ZWL$305.3 billion, resulting in an expenditure overrun of ZWL$46.3 billion (15.2%).

“Projected expenditure to year-end amounts to ZWL$509 billion (17% of GDP), mainly on account of Covid-19 related expenditures, increased outlays on grain procurement, as well as other development expenditures. As a result, the budget deficit for the first 9 months stood at ZWL$32.8 billion and is now expected to end the year at ZWL$14 billion (0.5% of GDP).”

According to Ncube, the total public debt as of the end of September 2021 amounted to US$13.7 billion, comprising of public external debt of US$13.2 billion, which now includes blocked funds from RBZ and domestic debt of US$532 million.

“Consistent with a growth projection of 5.5% in 2022, total revenue collections are projected at ZWL$850.7 billion (16.8% of GDP). On the other hand, expenditures in 2022 are projected at ZWL$927.3 billion (18.3% of GDP). Total recurrent spending will constitute 13.4% of GDP, while capital programmes will take up 5% of GDP. Employment costs will be contained at about 6.7% of GDP or 36.7% of revenues.

“The 2022 budget financing requirement/ deficit is projected at ZWL$76.5 billion, to be financed through the issuance of Government securities, utilisation of the country’s SDR allocation and external loan disbursements. This deficit constitutes 1.5% of GDP. You may recall that under the General Allocation of SDR456 billion, (equivalent to about US$650 billion), the Government of Zimbabwe in August 2021, was allocated SDR677.4 million (US$958 million equivalent) from the International Monetary Fund (IMF).”

Ncube said part of this SDR allocation will be used to finance the budget exclusively for social sectors, namely: health, education; productive sector value chains and infrastructure investment.

He said the proposed estimates for 2022 (including Constitutional and Statutory Appropriations) is ZWL$927.3 billion (18.3% of GDP).

“The amount, however, falls far short of requests submitted by line Ministries, Departments and Agencies (MDAs) and presented during the 2022 Budget Hearings, which were in excess of ZWL$2.7 trillion.”

The bulk of the proposed budget will go towards agricultural activities, said Ncube, adding that the thrust under agriculture is to surpass the 2021 production levels through the implementation of the key tenets of the Agriculture Recovery Plan.

“Based on the current agriculture financing model, Government will finance the Productive Social Protection Scheme for crop and livestock (support towards vulnerable households) while banks will fund the private sector, through the National Enhanced Agriculture Productivity Scheme (NEAPS), with Government providing guarantees where necessary.

He said an allocation of ZWL$124 billion to the Ministry of Lands, Agriculture, Water, Climate, and Rural Development is provided under the budget, targeted towards the following interventions grain production; horticulture; business advisory, and extension services; agriculture research, and colleges and other activities.