eBusiness Weekly
Business Writer
Finance and Economic Development Minister Mthuli Ncube, has projected the domestic economy to grow by 5,4 percent in 2022, anchored on growth in sectors such as mining, manufacturing, electricity generation, among others.
According to the 2022 Budget Strategy Paper (Strategy Paper) presented by Minister Ncube before Parliament yesterday, the 5,4 percent growth target will be underpinned by continued stable macroeconomic environment; and favourable international commodity prices and successful expansion of value addition chains.
Control over the Covid-19 pandemic and a successful vaccination programme will also be key.
According to Minister Ncube, preliminary projections indicate that Government revenues will slightly improve from 16.4 percent ($390,8 billion) of GDP in 2021 to 17.8 percent ($533,2 billion),in 2022.
“Similarly, expenditures are expected to increase from 18,2 percent ($421,6 billion) of GDP in 2021 to 19.4 percent ($579,1 billion) in 2022, in line with the desired sustainable budget deficit of 1,5 percent,” he said.
The anticipated budget deficit of $45,9 billion will be financed from domestic resources mainly through the issuance of Treasury Bills via the Auction System for competitive price discovery and enhanced transparency, with preference being given to Medium-to-Long-term securities.
“In addition, Government will also raise budget financing through domestic bond and USD-denominated Sovereign Bond to be issued and listed on the Victoria Falls Stock Exchange (VFEX).”
According to the Strategy Paper, any increased fiscal outlays will be met by improving revenue collection efficiencies and elimination of wasteful expenditures.
There will be no recourse to Central Bank overdraft facilities.
Instead, there would be elimination of all quasi-fiscal operations and limiting issuance of Treasury Bills to the approved budget deficit during 2022,” reads part of the Strategy Paper.
Minister Mthuli, however, said the 2022 macro-fiscal framework is not without risks, which could fundamentally change the projections.
“Some of the potential down side risks include an elevated Covid-19 pandemic both domestically and globally, negative climate shocks such as droughts or floods and the fall in international mineral commodity prices,” he said.
According to the Strategy Paper, structural reforms will need to be strengthened and accelerated to create the right conditions for inclusive, equitable, and sustainable economic growth and development in the medium term.
Non-monetisation of fiscal deficits and complementary monetary policy is expected to ensure inflation is maintained within the SADC macroeconomic convergence benchmark of 3-7 percent.
Cushion is could, however, come from the possible disbursement of the IMF Special Drawing Rights meant to provide liquidity support to member countries in their fight against the impact of Covid-19.
According to the Strategy Paper, the materialisation of such a development will go a long way in improving the economy, with the much-needed liquidity injection for capital projects, social protection programmes, as well as boost reserves.
“This will inevitably support higher growth than projected in the short to medium term.”
The priorities for the 2022 National Budget remain focused on sustaining macroeconomic stability, create a conducive environment for business investment, employment creation and ultimately improve the living standards of the majority.
This will be achieved by increasing investment in public infrastructure, elimination of administrative red tape, fighting corruption, reduce the cost of doing business in the country as well as increasing social spending.
Similarly, prudent fiscal and monetary policies will guarantee macroeconomic stability critical for increased private sector investment.
Meanwhile, successful implementation of the necessary steps to upscale domestic manufacturing is expected to result in the attainment of the desired growth target of 6,5 percent in 2022.
The attainment of this economic growth rate is in line to gradually improve the contribution of the secondary sector to GDP from 10,6 percent in 2020 to 15 percent by 2025, contribution of value-added exports to total exports from US$727 million in 2020 to about US$1,337 billion in 2025.
This will be achieved by prioritising value addition and beneficiation of agriculture and minerals.
