PARLIAMENT has described Finance minister Mthuli Ncube’s projected economic growth for 3% next year as unrealistic given the acute electricity shortages and drought facing the country.
Ncube last month proposed a $636 billion national budget for 2020 where he focused that the economy would bounce back from a -6.5% decline this year.
He said the revival would be driven by a better agriculture season and improved output from the mining industry, but Parliament’s budget, finance and economic development committee said the projections were too optimistic.
“Normal rainfall is not a guarantee of better harvests in the wake of costly inputs and emergence of crop diseases and pests like the fall army worm,” the committee said in its report reviewing the budget.
“A real growth rate of 3% while nominal gross domestic product is growing at 162% can only be as a result of inflation.
“The minister makes the assumption that improved electricity supply through imports and other alternative sources of energy such as solar will help turn around growth.
“In the wake of acute foreign currency shortages, this may be a tall order for the country.”
The committee chaired by former Finance minister Tendai Biti said while Ncube proposed viable interventions to address the electricity shortages, the results would only be realised in the medium or long term.
In the budget, the minister said he expected the agriculture sector to grow by 5% and mining by 4.7%, but the parliamentary committee said this would only be possible if Zimbabwe had a very good rain season. “Even with above normal rainfall, power generation at Kariba Hydro Power station can only improve five months into the year around May when the lake starts to receive inflows from its sources up north in the region,” the committee added.
“Mining is expected to grow by 4.7% in 2020. The achievement of 4.7% is possible if the sector receives uninterrupted power as per the power agreements signed and also if the issue of foreign currency retention is addressed in the first quarter of 2020.”
Ncube also said he expected monthly inflation to fall to single digit figures from the first quarter of 2020 to close the year at around 2%.
Biti’s committee, however, said inflation figures for the last quarter of 2019 painted a gloomy picture of the months ahead.
The parliamentarians said without a robust strategy to end the chaos on the foreign currency exchange market will worsen the economic decline.
“The revision of revenue and expenditure projections to $58.6 billion and $63.6 billion from $24.8 billion and $28.6 billion in the budget strategy paper is the clearest sign of inflation expectations by Treasury,” the committee added.
“This will be worsened by the movement towards cost recovery tariffs for electricity and market price for fuel.
“Without robust measures to bring exchange rate stabilisation and traction towards the interbank rate, inflation fight will be in vain in a country where prices are largely indexed to the parallel market rates.”
The committee was worried about the decline in exports at 13% in the first eight months of this year to US$2.44 billion from US$2.81 billion realised in the comparable period in 2018.
By December 2019, merchandise exports are projected at US$4.6 billion, a 2.2% contraction from US$4.7 billion recorded in 2018.
Meanwhile, merchandised imports are projected to close the year at US$5.3 billion compared to US$6.6 billion for 2018.
But, the committee noted that the reduction of imports without a corresponding increase in local production will result in higher input costs or crippling shortages and will have a negative impact on the economy. – The Standard