FINANCE minister Mthuli Ncube stuck to his 7,4% gross domestic product (GDP) growth target when he presented the 2021 National Budget yesterday, tipping most of the growth to be driven by strong recovery in agriculture, mining, electricity, construction and the transport and the communication industries.
KUDZAI KUWAZA/ TAURAI MANGUDHLA
The minister had indicated at the launch of the National Development Strategy 1 (NDS1) last week that the growth will be around this target.
Zimbabwe’s GDP is projected to fall by -4,1% this year due to de-industrialisation, power and fuel shortages, as well as foreign currency supply bottlenecks. But in his presentation, Ncube downplayed the threats that still linger due to high inflation, saying he remained confident of recovery in 2021.
“In terms of the economy, a GDP contraction of -4,1% is anticipated by year end, taking into account latest information indicating improving capacity utilisation than earlier anticipated and this particularly relates to the manufacturing sector,” the Finance minister said.
“Going forward, government’s response is now transitioning to ensure the economy recovers strongly, taking advantage of the milestones from the TSP (Transitional Stabilisation Programme), and targeting additional support measures to cushion vulnerable households.
“Furthermore, government will bring forward business and infrastructure investment activity, adequately prepare and support the forthcoming agriculture season and other productive sectors, albeit in a manner that does not promote vulnerabilities and instability. Therefore, economic growth is expected to rebound in 2021 from the consecutive two-year slump to record 7,4,” he added.
Ncube said year-on-year inflation will end the year 2020 at 336%, but will decline to 135% next year.
“In the outlook, annual inflation is expected to drastically slow down to an average of below 135% in 2021, while average month-on-month inflation is expected to be below 1%” Ncube said.
But economic analysts said the growth targets will be difficult to achieve.
“He (Ncube) is dreaming,” CEO Africa Roundtable chairman Oswell Binha said.
“When you make a projection, you have to make an honest assessment of where you are today. You also have to consider that when you make these proposals, some of them will be challenged and some of them will be resisted.”
“I will be the first one to congratulate him if he achieves the 7,4% growth,” Binha said.
Zimbabwe National Chamber of Commerce CEO Chris Mugaga agreed with Binha.
“It is not feasible. We are coming from a very low base and there are too many irregularities in the budget,” Mugaga pointed out.
“It is overly ambitious,” he added.
Business consultant Simon Kayereka said a number of factors militate against Ncube’s growth projections. “If there is going to be any growth, I estimate it will be around 3%,” Kayereka said.
Ncube yesterday delivered a ZW$421,6 billion (about US$5,1 billion) budget. Public sector employment costs will guzzle the biggest amounts of the national purse in 2021, according to the budget.
He said revenue collections are projected at ZW$390,8 billion (about US$4,8 billion) with a ZW$31 billion (about US$383 million) deficit.
Of the ZW$421,6 billion budget, capital expenditure will constitute ZW$131,6 billion (US$1,6 billion), against ZW$290 billion (US$3,5 billion) for recurrent expenditure. Public investment in infrastructure and other growth stimulating projects drive economies. But in the past decade, national budgets have been drained by public sector wages.
The minister said employment costs will guzzle ZW$172,6 billion (US$2,1 billion) in 2021, which is far ahead of the capital budget.
Government ministries had requested funding of up to ZW$1,1 trillion (US$13,4 billion) to drive economic recovery.
“Total bids submitted to Treasury by various line ministries and departments are much higher than the capacity of revenues and borrowings. Therefore, given the macro-fiscal stabilisation objectives of the budget and the National Development Strategy 1, adhering to an expenditure ceiling of ZW$421,6 billion becomes imperative,” Ncube said.
Analysts questioned how the deficit would be funded, given Zimbabwe’s poor relations with international financiers. But the minister said most of the deficit would be funded by development partners, who are expected to chip in which US$841,5 million. Of this, US$559,3 million is expected from bilateral partners, with US$282,1 million coming from multilateral partners.
Ncube said from January to September 2020, a total of US$579,8 million was disbursed by development partners, of which US$448,4 million was from bilateral, while US$131,4 million was from multilateral partners. A total of ZW$46,3 billion (US$566 million) has been allocated to the Ministry of Lands, Agriculture, Water, Climate and Rural Resettlement, with a view to increasing agricultural output to US$8,2 billion by 2025.
The agricultural expenditure is in addition to the ZW$6,1 billion (US$74,5 million) provided under the ZW$18,2 billion (US$222,5 million) stimulus package towards stimulating agricultural production.
“Government support is being complemented by private sector and individual farmer initiatives as well as development partner support. Consequently, for the 2020/21 farming season, a contract equivalent to US$253 million has been signed with local banks to support commercial farmers, and government is providing guarantees on a case by case basis,” Ncube said.
The Ministry of Mines was allocated ZW$1,4 billion (US$17,1 million) towards planning, promotion of exploration, data capturing and automation, among others. Ncube said the budget allocated ZW$1,8 billion (US$22 million) in support of the Ministry of Environment, Tourism and Hospitality Industry.
“Revival of the tourism industry is set to achieve US$5 billion by 2025, anchored on the country’s abundant natural resources, rich cultural heritage and diverse scenery,” he said.
Government will invest ZW$139,8 billion (US$1,7 billion) into the Infrastructure Investment Programme, while ZW$10 billion (US$122,2 million) will go towards the Harare-Beitbridge road rehabilitation project.
ZW$3,8 billion (US$46,4 million) will be disbursed towards Robert Mugabe International Airport, while the devolution programme was allocated ZW$19,5 billion (US$238,4 million).
The Ministry of Primary and Secondary Education received the biggest allocation of ZW$55 billion (US$672,3 million), followed by the Ministry of Health, which was allocated ZW$54,7 billion (US$668,7 million).
In the security cluster, Defence, Security and War Veterans ministry was expected to get ZW$23,8 billion (US$290,9 million), while the Home Affairs and Cultural Heritage ministry vote was ZW$23,6 billion (US$288,5 million).
Citizens Health Watch trustee Fungisai Dube said: “The government needs to state clearly how it will innovate around health care funding, especially maternal and reproductive health and move away from a health financing model that is heavily dependent on donor finances. “As Citizens Health Watch, we believe, the budget allocated for the heath sector falls far short of what will be needed to revive a failing health sector overwhelmed by Covid-19.
“The virus has had a devastating and crippling effect on health, in particular sexual reproductive health, threatening gains made in this sector. The budget must speak to how it will safeguard the health of the nation, especially women, who are already bearing the burden of the virus.”