HomeBusiness DigestMurerwa sees recovery despite gloom

Murerwa sees recovery despite gloom

Eric Chiriga

FINANCE minister Herbert Murerwa yesterday maintained that the economy is on the recovery path despite deteriorating economic fundamentals.

elvetica, sans-serif”>Presenting the 2006 national budget statement, Murerwa forecast the economy to grow by between 2 and 3,5% next year, with agriculture expected to register growth of 14,8%.

The forecast attracted loud interjections from members of the opposition in the house.

Murerwa’s forecast is in sharp contrast to deteriorating economic fundamentals and the alleged lack of preparedness in the agricultural sector due to lack of inputs.

He forecast real gross domestic product (GDP) to decline by 3,5% in 2006.

“The high international oil prices, coupled with the poor performance of the past agricultural season, have impacted negatively on the economy, resulting in an anticipated decline of 3,5% in real GDP,” the minister said.

He also said the agricultural sector, which is expected to help achieve the forecast economic growth of between 2 to 3,5% in 2006 through increased hectarage and timely provision of inputs among other measures, is projected to decline by 12,8% this year.

“The agricultural sector is projected to register a decline of -12,8% in 2005 mainly due to the drought and the non-availability and or the delayed availability of critical inputs such as fertilisers, chemicals, equipment and fuel,” Murerwa said.

The projection that the agricultural sector will decline by a negative 12,8% contradicts Murerwa’s statement in his national budget statement for 2005, when he predicted that agriculture would grow by 28% underpinned by production in tobacco, sugar, maize, wheat and cotton.

The agricultural sector is now expected to improve from a decline of negative 12,8% this year to positive growth of 14,8%.

Murerwa also said the mining sector, the country’s most lucrative investment area, declined by 5,7% this year.

“The mining sector is anticipated to register a decline of 5,7% in 2005, largely due to deteriorating international mineral prices, rampant smuggling of gold, diamonds and other precious minerals.”

In his previous budget Murerwa had anticipated positive growth of 7,5% this year.

“The mining sector, which contributes about 4% to GDP, is projected to register a positive growth of 7,5% in 2005 after recording an estimated growth of 11,6% in 2004,” Murerwa said.

With regard to the inflation rate, Murerwa maintained that the rate will decelerate to 80% by the end of 2006 although it is on an upward trend, rising from less than 200% to 411% this year.

Analysts have predicted an inflation rate of about 600% by February 2006.

Murerwa said the objective was to achieve a rate of 30-50% by this month, with single digit inflation afterwards.

“The annual rate of inflation is, however, targeted to decline to around 80% by the end of 2006.”

Under the balance of payments, Murerwa said there will still be a negative trade balance of US$363 million.

He said in the external sector, total exports for the year are forecast to decline by 6,4% to US$1,6 million.

“The capital account remained without significant inflows, against the background of low grant support, foreign direct investment and long-term capital inflows,” Murerwa said.

Murerwa said the continued dominance of domestic financing of the budget deficit this year pushed the total stock of domestic debt up from $1,7 trillion in December 2004, to $15,9 trillion by the end of October 2005.

He also said the manufacturing sector was expected to decline by 3%.

“The manufacturing sector, which had shown signs of recovery in 2004, slowed down in 2005 and is projected to register a decline of 3%.”

…the highlights

* A $123,9 trillion budget;

* Total revenue: $110 trillion;

* Budget deficit: $13,9 trillion (4,6% of GDP);

* Economy to grow between 2%-3,5%;

* Agriculture growth 14,8%;

* Maize production to increase 33%;

* PAYE threshold adjusted from $1,5m to $7m;

* Income tax band widened to $40m a month;

* $20m tax free bonus;

* Travel allowance increased from US$250 to US$300;

* Inflation to end 2006 at 80%;

* Education, Sports and Culture: $7,4 trillion;

* Health: $5,2 trillion;

* Defence: $4,3 trillion;

* $30,9 trillion for capital projects;

* State debt increases to $15,9 trillion from $1,7 trilion;

* Operation Garikai/Hlalani Kuhle gets $800 billion;

* Ministries that exceed budget allocations will be garnished 10% on vote;

* Further liberalisation of exchange rate in 2006;

* Price controls scrapped;

* Customs duties amount to $2,2 trillion against a target of $1,8 trillion;

* Value Added Tax performs above target – $5,9 trillion collected against a target of $5,2 trillion;

* Revenue collections for 10 months to October 2005 were $19,2 trillion against a target of $17,9 trillion;

* Total exports are forecast to decline by 6,4% to US$ 1,6 billion;

* Imports to decline by 2,6% to US$ 1,9 billion;

* Upholding of bilateral investment agreements;

* No to new farm invasions; and

* Promises to reduce arrears to International Monetary Fund.

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