Mthuli in buoyant mood, maintains high growth prospects
Harare (New Ziana) –Finance and Economic Development Minister Professor Mthuli Ncube on Thursday maintained Zimbabwe’s economic growth this year at 7.8 percent, but projected slower growth of 5.5 percent in 2022, all driven by higher mineral commodity prices and good management of the COVID-19 pandemic.
Proposing a $927.3 billion 2022 national budget, he said growth in agriculture, construction, as well as accommodation and food services (tourism) sector would spur the projected strong economic growth.
Ncube said the 2022 National Budget, which is the second annual fiscal plan government is using to implement the National Development Strategy 1(2021-2025), sought to strengthen macro-fiscal stability; enhance public service delivery, including social protection and infrastructure development, strengthen good governance and anti-corruption measures and accelerate the re-engagement process.
“The underlying assumptions for the projected growth include the following: Normal to above normal rainfall pattern; subdued COVID-19 pandemic; relatively stable exchange rate and declining inflation; and favourable international mineral prices,” he said.
“Potential risks to the above projected growth include the uncertainty in the future path of the pandemic and exchange rate volatility, which may contribute to high inflation. Other risks relate to under performance and viability of some of the State-Owned Enterprises, extreme weather conditions, retreat in international commodity prices and higher than anticipated international oil prices.”
Ncube said key sectors such as mining and agriculture would grow respectively by 3.4 percent this year and 8 percent next year, and 36.2 this year and 5.1 percent next year.
The manufacturing sector was expected to grow by 6.2 percent in 2021 and 5.5 percent in 2022.
“With a growth projection of 7.8 percent for the year 2021, Zimbabwe’s economy is among the high performers under difficult COVID-19 conditions and well above the 3.4 percent average growth for Sub-Saharan Africa.
“Alongside GDP growth, average industry capacity utilisation is gradually picking up, reaching 47 percent and 54 percent in the first and second quarter of 2021, respectively. By year end, it is projected to average 65 percent, reflecting output gains from ongoing macroeconomic stabilisation and improved access to foreign currency through the foreign currency auction system,” he said.
“Reforms have also seen inflation retreating, with annual inflation as measured by the CPI declining from 837.5 percent in July 2020 to 54 percent in October 2021. In the same vein, prudent management of public finances has produced minimal budget balances ranging from 0.2 percent of GDP in 2019, 1.7 percent in 2020 and a modest projected deficit of -0.5 percent in 2021. This judicious budget management has provided capacity and scope for channeling more resources to essential programmes in infrastructure and social services.”
In terms of revenue performance, during the first nine months to September 2021, collections amounted to $317.4 billion against a projection of $291.5 billion, resulting in a positive variance of 8.9 percent while for the full year revenues are expected to reach $495.01 billion or 16.6 percent of GDP.
He said merchandise exports increased by 19.2 percent to US$4.1 billion in the first nine months of 2021, from US$3.4 billion in 2020, spurred by increases in agriculture and mineral exports.
Imports on the other hand increased to US$4.2 billion for the nine months to September, a 27.3 percent increase from US$3.3 billion over the same period last year.
The increase in imports, he said, was reflective of the growing economy and foreign currency availability on the auction system.
“Mr Speaker Sir, consistent with a growth projection of 5.5 percent in 2022, total revenue collections are projected at $850.7 billion, on the other hand, expenditures in 2022 are projected at $927.3 billion. Total recurrent spending will constitute 13.4 percent of GDP, while capital programmes will take up 5 percent of GDP.
“Employment costs will be contained at about 6.7 percent of GDP or 36.7 percent of revenues, Mr Speaker Sir, the 2022 budget financing requirement/deficit is projected at $76.5 billion, to be financed through issuance of government securities, utilisation of the country’s Special Draw Rights allocation and external loan disbursements. This deficit constitutes 1.5 percent of GDP,” he 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.”
Ncube said to aid the current economic growth trajectory, monetary and fiscal authorities were rigorously implementing necessary interventions such as reviewing the foreign currency auction system, tightening the monetary policy, curbing of malpractices in the financial sector and keeping inflation on the desired path through maintaining a tight fiscal and monetary stance and taming the parallel foreign currency market.
“Mr Speaker Sir, 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,”
“In consolidation of macroeconomic stability, a prudent fiscal policy complimented by tight monetary policy is being pursued under the 2022 Budget. This entails containing expenditures within the Budget, non-recourse to Central Bank financing, continuation of monetary targeting and improving the foreign currency auction system.”
Meanwhile, the Ministry of Primary and Secondary Education got the largest budget allocation at $124.069 billion followed closely by the Ministry of Lands, Agriculture, Water, Fisheries, Climate and Rural Development at $124.049 billion.
The Ministry of Health and Child Care received a budget allocation of $117 billion, which represents 14.9 percent of the budget, surpassing the Abuja target which calls on government sto allocate at least 10 percent of their budgets towards health care.
“Mr Speaker Sir, despite the current efforts towards revitalization of our health sector, it is apparent that gaps still exist in the health delivery system attributed to shortage of medicines, shortage of critical infrastructure and equipment, roll out of the COVID-19 vaccination programme.
“Therefore, priority in 2022 will be on rehabilitation, upgrading and construction of healthcare infrastructure, including provision of medical equipment, ambulances and operational vehicles. Further, Government will increase fund for medical consumables, hiring of additional medical personnel and reviewing salaries and wages,” he said.