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Mthuli projects higher growth

30 Jul, 2021 - 00:07 0 Views
Mthuli projects higher growth Professor Mthuli Ncube

eBusiness Weekly

Business Writer

Finance and Economic Development Minister Mthuli Ncube, has revised upwards the country’s GDP growth projections and has vowed to stay the course through the implementation of existing policies.

Presenting the 2021 Mid-Term Budget and Economic Review at Parliament in Harare yesterday, Minister Mthuli projected the country’s GDP to grow by 7,8 percent slightly above the 2021 National Budget growth forecast of 7.4 percent.

He said the strong rebound of the economy is anchored on a better 2020/21 rainfall season, higher international mineral commodity prices, stable macroeconomic environment and Covid-19 pandemic response measures, including vaccination programme.

Agriculture, for example, is now estimated to grow by 34 percent, up from the original 2021 Budget projection of 11 percent.

The current account balance for 2021 is projected to remain in a surplus position, albeit at a moderated level of US$611,6 million, compared to US$1 billion recorded in 2020

In line with the Reserve Bank of Zimbabwe’s inflation forecast of 25 percent, Minister Mthuli also widened the year-end range of inflation to between 22 percent and 35 percent.

“The current price and exchange rate stability will go a long way in supporting industry in making long term investment decisions and allow for the efficient allocation of resources,” according to Minister Mthuli.

His observation is not far detached from what is happening on the ground with data from Zimstat showing local industry has been ramping up the importation of capital goods, preparing to venture into serious business. According to latest figures from Zimstat, the country imported capital goods worth US$527 million in the first five months of the year.

While this figure constitutes 15,5 percent of total imports, it is the highest by category.

Giving an update on the budget out-turn for the first six months of the year, Minister Mthuli said budget execution indicates continued dividends from the fiscal consolidation measures being pursued since the Transitional Stabilisation Programme (TSP), a forerunner to the National Development Strategy running to 2030.

To that end, for the period January-June 2021, revenues are estimated at $198,2 billion, whilst expenditures were about $197,6 billion, resulting in an almost balanced budget position, with a small surplus of $570 million.

Cumulative revenue collections for the period January to June 2021 amounted to $198,2 billion against a target of $182,1 billion, resulting in a positive variance of $16 billion or 8,8 percent.

Minister Ncube said this positive performance was attributed to both tax and non-tax revenues, which were above targets by 5,3 percent and 392 percent, respectively.

click the link below to read the full budget review

https://drive.google.com/file/d/1DgU22aJBn_KmhnRAbw01Fc-o8l6mmopP/view

He also disclosed, for the first time, how much foreign currency Government is collecting.

“Total revenue collections also include net cumulative foreign currency collections of US$698,5 million (against a target of US$660 million).”

In the outlook, the budget is anticipated to remain more or less on course assuming limited impact of exigencies and containment of expenditure pressures, according to the Treasury boss.

The budget expenditure target of $421,6 billion will thus be maintained, according to Minister Mthuli.

“There is need to stay the course. Therefore, there are no policy changes as I believe the existing policies are achieving the desired results and are still adequate.

“We only need to stay the course, and any substantial policy changes will be introduced through the 2022 National Budget,” said Minister Mthuli.

In terms of Votes performance, Minister Mthuli said disbursements to Ministries, Departments and Agencies were generally in line with planned and budgeted programmes and projects, save for unforeseen but essential developments, particularly those meant to save and cushion lives against the pandemic.

Expenditure on Government programmes during the period under review was 41 percent of total budget against a half year target of 45 percent.

Turning to external sector developments, Minister Ncube said access to external financing remains constrained, due to debt arrears. This has left domestic financial markets as the major source of budget financing.

“Consequently, domestic debt as at end April 2021 amounted to $20,9 billion.”

Public and Publicly Guaranteed External debt including RBZ external guaranteed debt, however, remained elevated at US$10,5 billion, government only managing to make token payments as part of the re-engagement process with the International Community.

This, according to Minister Mthuli, is in line with the Arrears Clearance and Debt Relief Strategy which is critical in regaining access to concessional financing from both multilateral and bilateral development partners. Payments to Paris Club Creditors will also begin in the second half of 2021.

Despite challenges in accessing foreign currency, the country’s foreign currency generation capacity has remained strong in support of the country’s balance of payments requirements, as well as stabilising the exchange rate.

The current account balance for 2021 is projected to remain in a surplus position, albeit at a moderated level of US$611,6 million, compared to US$1,096 billion recorded in 2020.

Merchandise exports are projected to increase by 4,2 percent, from US$4,9 billion in 2020 to US$5,1 billion in 2021 while merchandise imports are also projected to increase by 11,1 percent to US$5,2 billion in 2021, from US$4,7 billion in 2020.

Remittances are also projected to continue to drive the current account surplus in 2021, with end year projection of US$1,3 billion.

Between January and June 2021, the country received US$746,9 million in diaspora remittances compared to US$288,7 million received during the same period last year.

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