More austerity measures for Zimbabwe as deficits ravage economy

Finance Minister Prof. Mthuli Ncube
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HARARE – Zimbabwe’s Finance Minister, Mthuli Ncube has piled up further austerity measures for crisis weary Zimbabweans by introducing salary cuts for civil servants and requiring that import duty for vehicles and other goods be paid for in forex as he projected a 3.1 percent economic growth for 2019 although fiscal deficits would still dog the country’s economy.

Zimbabwe’s economy is expected to grow by 4 percent this year after a rebasing of productivity in the country. The “impact of unfavorable weather on agriculture and macro fiscal vulnerabilities from previous unsustainable fiscal and current account deficits” are expected to weigh in on 2019 economic growth.

Ncube, whose 2019 budget statement was marred by commotion in the house of assembly which prompted opposition legislators to walk-away, said Zimbabwe’s nominal groww domestic product (GDP) for 2019 would be about US$31.6 billion (R435bn).

The country is expected to generate revenues amounting to US$6.6bn in the coming year, with including retentions expected to contribute US$400 million, tax collections amounting to US$6.037bn and no- tax income seen at US$162m.

However, government expenditures are projected to soar to US$8.2bn, on the back of capital expenditures estimated to be at US$2.018bn. This effectively leaves out about US$6.1bn for current expenditures, translating to a deficit of $1.6bn, which represents about “5 percent of GDP” for the year.

“The 2018 nominal GDP is now US$24.6bn, from a previous level of US$21bn. Following rebasing, per capita GDP for 2017 rose from US$1 235 to US$1 508, and is being projected to reach US$1 642 by end of 2018, placing Zimbabwe in lower middle income status,” Ncube said.

The budget deficit for 2018 is now projected at US$2.86bn against a target of US$793m.

As part of austerity measures and to contain government expenditure, the Zimbabwean government “has decided that effective 1 January 2019, a 5 percent cut on basic salary, be effected for all senior positions from Principal Directors, Permanent Secretaries and their equivalents up to Deputy Ministers, Ministers and the Presidium”.

The Zimbabwean Finance Minister will also focus on weeding out “ghost workers” from the civil service wage bill. He said the government will “introduce a biometric registration of all civil servants” with effect from the beginning of 2019.