Zimbabwe govt explains stimulus package

Finance Minister Mthuli Ncube

THE foreign currency earning sectors of manufacturing, tourism and mining will receive just $4,52 billion, the shorter end of the $18 billion stimulus package despite the impact of COVID-19 being more pronounced in those sectors.

Meanwhile, Treasury has allocated $6,08 billion to agriculture, while current drought-like weather conditions have already written off the larger part of the 2019/20 season and threaten a repeat for the 2020/21 period.

In a statement released on Monday by Finance minister Mthuli Ncube, from the $18 billion stimulus, $3,02 billion (US$120,8 million) was set aside for industry, $1 billion (US$40 million) mining and $500 million (US$20 million) tourism.

“On 1 May 2020, the President of the Republic of Zimbabwe, His Excellency, ED Mnangagwa, unveiled an $18 billion economic recovery and stimulus package aimed at reinvigorating the economy and providing relief to individuals, families, small businesses and industries impacted by the economic slowdown to control the health crisis,” he said.

Of the money allocated to agriculture, $3,2 billion (US$128 million) will go to supporting the winter wheat cropping programme while another $2,88 billion (US$115,2 million) has been set aside for the 2020/21 cropping season.

Globally, countries are crafting stimulus packages that makeup at least 10% of their gross domestic product (GDP) to resuscitate economies in the midst of the COVID-19 pandemic. Using Zimbabwe’s GDP as at the end of 2018 when the economy was dollarised, the country needs at least US$2 billion to recover. From the $3,02 billion meant for industry of which $2,05 billion (US$82 million) is a government guarantee for bank loans, the allocated funds are not enough for a sector that generated US$3,9 billion in export proceeds last year.

Further, the Chamber of Mines of Zimbabwe reported in March that the mining industry would lose revenue exceeding US$400 million, yet only $1 billion or US$40 million has been set aside for it.

Other support measures to mining include reducing application fees and annual rentals, resuscitating gold mines by designating them special economic zones and ring-fencing fuel and power for the sector.

Ncube also announced that they would speed up the implementation of a computerised cadastre system to create confidence in the management of mining title and strengthen security of tenure so as to promote investment in mining.

In regards to tourism, the sector on average generates US$1 billion in annual receipts based on data from the Zimbabwe Tourism Authority, yet it was just allocated just $500 million (US$20 million).

“In order to promote domestic tourism, a waiver on VAT payable by domestic tourists for accommodation and visitor services has been granted. Domestic tourism will be the first to recover in the wake of global travel restrictions,” Ncube said.

Government has also deferred the mandatory liquidation of foreign currency paid by international clients whose plans were interrupted by the global lockdown so that they can be used when foreign visitors return.

“An amount of $20 million of seed capital, will be set aside to kickstart a tourism revolving fund which will give working capital to players in the sector. Government will settle all long overdue bills with tourism sector players for services already rendered and that should unlock working capital resources,” Ncube said.

While Zimbabwe has no access to bailout or debt cancellations packages, government is losing an average of US$1 billion to corruption, US$1 billion to smuggling and over US$1 billion to subsidies annually. If government plugs these leakages, it could immediately have access to over US$3 billion. Additionally, securitisation of minerals and more transparency could further unlock substantial revenues, according to experts.

SMEs have been allocated $500 million, arts sector $20 million (US$800 000), liquidity released statutory reserves of $2 billion (US$80 million), health $1 billion, broad relief measures $1,5 billion (US$60 million), and $2,4 billion (US$96 million) towards a food grant.

Source – newsday