The implementation of reforms under the Transitional Stabilisation Programme (TSP) has averted the economy from being weakened by adverse exogenous factors, according to Finance and Economic Development Minister Professor Mthuli Ncube.
Zimbabwe, like any other country, is not immune to the vagaries of the global economic climate.
But the disciplined implementation of economic reforms showed as the country registered 4 percent growth in its Gross Domestic Product (GDP) in 2018, marginally down from the initially set growth target of 4,5 percent.
Minister Ncube said the achieved GDP growth numbers shows that progress is being made on the economic reform front.
“We don’t live in a perfect world with perfect conditions. So many factors are out of our control; from natural disasters, to global events; from oil prices to the outbreak of disease.
“The most important thing is that the train of sensible economics is firmly back on the tracks.
“The implementation of the TSP reforms, with its long-term focus, has indeed begun in earnest. Notwithstanding setbacks from downside risks related to drought conditions and Cyclone Idai, foreign currency shortages, restricted access to international financial markets, and other exogenous factors, there are indeed noticeable scores from the reforms,” said Minister Ncube in his weekly column.
“Evident successes are in fiscal consolidation and discipline, the removal of various pricing distortions, monetary sector and currency reforms, infrastructure rehabilitation, and ‘Doing Business Environment reforms’ which will attract investment.
“As a result, growth, which could have declined by much higher margins, was saved and is now estimated at 4 percent for 2018, only slightly behind our ambitious target of 4,5 percent.
“The anticipated growth was driven mainly by agriculture, mining and services on the back of improved confidence and new investment in both private and public sectors during the first half of the year.”
Zimbabwe’s current reforms are guided by the TSP — which was launched in October last year — with the main goals of stabilising the economy, attract Foreign Direct Investment (FDI) and set the foundation for shared and sustained growth.
The TSP essentially targets a number of areas for reform including macro-fiscal stabilisation; building a conducive investment environment and launching quick-wins to stimulate and sustain a renewed private sector led growth economy; re-integrating the country into the global economy; and the promotion of sound and good governance as an essential ingredient for socio-economic cohesion and development.
Some of the critical policy reforms that have been implemented since the last of quarter of 2018 include the introduction of the 2 percent Immediate Monetary Transaction (IMT) Tax, the separation of Nostro foreign currency accounts (FCAs) and Real Time Gross Settlement (RTGS) FCAs.
The Government also moved to increase fuel prices by 140 percent to reduce subsidy levels. Before the price hike, Zimbabwe’s petrol price stood at $1,38 per litre thus assuming US dollar parity, a position that provided opportunities for negative arbitrage.
Although some of the measures are austerity-based and a bitter pill to swallow, Minister Ncube highlighted some of the positive outcomes that have already been recorded:
“By December 2018, an incredible budget surplus was recorded according to the preliminary budget outturn. We are spending less and raising more, Economics 101.
“Revenue collections during the fourth quarter of 2018 stood at US$1,69 billion, already surpassing the set target of US$1,18 billion by a massive 43 percent.
“This fourth quarter performance also represents a phenomenal 60 percent increase from the collections of US$1,06 billion recorded during the same period in 2017. While this is still part of a wider ‘hole’ filling process; it is progress,” he said.
“Similarly, fourth quarter revenues surpassed third quarter revenues of US$1,3 billion by 31 percent, reflecting high inflation impact, as well as the introduction of the Intermediated Money Transfer Tax (IMTT) in November.
“These revenues have already been put to good use as part of our rescue and rehabilitation efforts for Cyclone Idai.
“While it would have been preferable to put these funds to long term strategic reforms, government has an immediate responsibility to protect its citizens, and when the natural disaster struck, we had to step in with tactical measures.”