eBusiness Weekly
Business Writer
FINANCE and Economic Development Minister Professor Mthuli Ncube presents the 2021 midterm budget review statement to Parliament this afternoon with measures to cushion industry, the economy and citizens expected to top the agenda.
Usually, a budget review takes stock of the journey the country travelled since January with regard to implementation of programmes and targets the minister would have outlined when he first presented the fiscal policy.
Mthuli last year presented a $421 billion national budget statement, premised on the assumption that the cumulative revenue collections for the 12 months to December 2021 would total $390.8 billion.
Overall, the finance and economic development minister predicted a national budget balance of minus $30.8 billion while the current account was expected to close the current financial year at around $73.8 billion.
The treasury chief projected that the economy would grow by 7.4 percent, after a straight two-year downturn, largely driven by agriculture and mining, while inflation was forecast to end the year at 9 percent.
The strong projected growth this year was also backed by the International Monetary Fund (IMF), which foresees a 6 percent expansion and the World Bank, which predicted a conservative 3.9 percent growth.
A majority of Zimbabwe’s economic sectors are expected to register significant growth, after a strong agriculture season and expected commodity price boom, amid growing stability. But the midterm policy review will seek to bolster the current growth trajectory and make corrections on any areas going off course.
Zimbabwe’s economy has been characterised by improved macroeconomic and exchange rate stability, anchored by the foreign exchange auction system introduced in June last year, tight fiscal and monetary policies.
This has resulted in sustained decline in annual inflation, which peaked at a post dollarisation high of 837.6 percent in July 2020, but fell to its lowest level since 2019 when the rate hit the two-digit level of 56.37 percent only this month.
Other notable milestones have been consistency on monetary and fiscal discipline, which have resulted in unflinching exchange rate stability, which in turn has helped anchor the decline in the previously galloping inflation.
The Confederation of Zimbabwe Industries (CZI) said this week the budget, while majorly a review statement, should carry measures that render further support to growth and prevailing stability in the economy.
Industrialists contend this should entail improved access to foreign currency, electricity and key enablers, among others.
In an interview ahead of Minister Mthuli’s budget review presentations this afternoon, CZI president Henry Ruzvidzo, said the industrial lobby group had noted positive growth in the majority of sectors of the economy.
Zimbabwe’s economy is poised to grow significantly, despite the long shadow of the Covid-19 pandemic, driven by a stellar agricultural season, global commodity price boom, construction and electricity sectors.
“We expect the budget (review) to support the growth by continuing to ensure foreign currency availability, adequate electricity and other supporting infrastructure,” Ruzvidzo said earlier this week.
He said production required adequate working capital and a conducive business environment. Ruzvidzo said it was therefore critical that monetary and fiscal discipline be sustained to maintain macro-economic stability.
“Currency reform continues to be carefully calibrated whilst addressing market distortion. We expect all subsidies will be fully provided for in the budget with some consideration for stimulating the hardest hit sectors by Covid-19,” he said.
The CZI president said that efforts by the Government to reestablish external lines of credit, following decades of hurtful illegal western embargo, must continue in order to sustain the current growth momentum.
Analysts said they expected policy measures to cushion the economy and citizens from the adverse impact of the third wave of Covid-19 and expect to prominently feature in Mthuli’s budget review.
Economist Professor Gift Mugano said amid the surge in Covid-19 cases in Zimbabwe, the finance minister should announce a supplementary budget to double ongoing efforts aimed at containing the pandemic.
Mugano said when the finance minister first presented the 2021 national budget; he expected that the threats from the global pandemic would by now be much less than the current rampage by the virus under the third wave.
Further, Mugano said apart from measures to stop the rapid spreading of Covid-19, Minister Ncube should also prescribe budgetary measures to support cushion and bail out industry and commerce.
Another economist, Persistence Gwanyanya said Minister Ncube should pronounce fiscal incentives that could include tax cuts, tax holidays and duty exemptions on key imports like agricultural equipment and capital goods.
Gwanyanya said there was a need to come up with policy interventions to foster a structural shift that brings permanent solutions to challenges facing the economy while ensuring better yields, increased productivity and stronger value chains.
According to a 2021 budget strategy paper which has already been presented to and approved by Cabinet, the economy is projected to grow by 5.4 percent in 2022, anchored in growth in mining, manufacturing and electricity generation, among others.
The Government’s revenue is expected to improve from 16.4 percent ($390.8 billion) of the Gross Domestic Product (GDP) in 2021 to 17.8 percent ($533.2 billion) in the coming year.
On the other hand, expenditure is anticipated to increase to 19.4 percent ($579.1 billion) of total national economic output next year from the 18.2 percent ($421.6 billion) in 2021.
In the 2022 budget, the Government will prioritise sustaining macroeconomic stability, for conducive business and investment conditions and to improve the living standards of citizens.
Priority areas in 2022 will include inclusive growth and macro-economic stability, developing and supporting productive value chains, optimising value in natural resources, infrastructure, ICTs and digital economy.
