Covid-19 expected to top Thursday budget review

Golden Sibanda |  1 year ago | business

FISCAL policy measures to cushion the economy and citizens from the pummelling of the third wave of Covid-19 are expected to feature prominently when Finance and Economic Development Minister Mthuli Ncube, delivers his rescheduled midterm National Budget review to Parliament this Thursday. 

The Treasury chief was initially expected to present the midterm budget last week, but later announced that presentation of the fiscal statement to legislators in the national assembly had been shifted to Thursday this week. 

Economist Professor Gift Mugano said amid the surge in Covid-19 cases, which saw Zimbabwe relapsing in a relaxed mode of Level Four Lockdown, the Minister should announce a supplementary budget to double efforts at containing the pandemic. 

Prof Mugano said in the interview that when the Minister first presented the 2021 budget, he expected threats from the respiratory disease to be much less than the rampage by the virus under the third wave. 

“When he presented the 2021 budget he expected the situation would be better or there would be an improvement in the Covid-19 situation. I expect that he announces additional resources to fight Covid-19,” Prof Mugano said. 

Further, Prof Mugano said apart from measures to stymie an ungoverned spread of the Covid-19 pandemic, Minister Ncube should also prescribe fiscal measures to support, cushion or bail out industry and commerce.

Another economist, Persistence Gwanyanya said Minister Ncube should pronounce fiscal incentives that could include tac cuts, tax holidays and duty exemptions on key imports like agricultural equipment and capital goods.

Mr Gwanyanya said there was a need to come up with policy interventions to foster a structural shift that brings permanent solutions to challenges facing the economy while ensuring better yields, increased productivity and stronger value chains. 

He said the manufacturing sector, which is also expected to contribute to growth this year, should be supported to ensure that it supports broader economic imperatives like job creation and industrialisation.

Mr Gwanyanya said the measures should support more productivity in agriculture, anticipated to drive growth following a good rainy season and manufacturing, which has been spurred by stability since June 2020 on account of improved access to foreign currency.  

“Manufacturing is now expected to contribute meaningfully to the economy. It is interesting and comforting because it speaks to industrialisation, which is a significant share of gross domestic product,” he said. 

Mr Gwanyanya said mining was poised to support economic recovery this year, especially gold production, which hit an all-time monthly record of 2,9 metric tonnes in June, driven by incentives extended by the central bank.

But he pointed out that the budget review was largely a tool to take stock of the journey the country has travelled since the beginning of the year and whether it remains on course to meet its growth targets.

However, Mr Gwanyanya said he was in agreement with assessments made by the International Monetary Fund and World Bank, which projected growth of 6 percent and 3,9 percent respectively.

The global lenders acknowledged the positive impact agriculture will have on the economy after the good rains received across the country, as well as contributions expected to come from mining, construction, infrastructure and electricity generation.

Minister Ncube last year presented a $421 billion National Budget Statement, premised on the assumption that the cumulative revenue collections for the 12 months to December 2021 would total $390,8 billion.

Overall, the finance and economic development minister predicted a 2021 National Budget balance of minus $30,8 billion while the current account was expected to close the current financial year at $73,8 billion.

The treasury chief projected that the economy would grow by 7,4 percent, after a straight two-year downturn, largely driven by agriculture and mining, while inflation was forecast to end the year at 9 percent.

The strong projected growth this year was also backed by the International Monetary Fund (IMF), which foresees a 6 percent expansion and the World Bank, which predicted a conservative 3,9 percent growth.

A majority of Zimbabwe’s economic sectors are expected to register significant growth, after a strong agricultural season and expected commodity price boom, amid growing stability.

The economy has been characterised by improved macroeconomic and exchange rate stability, following the introduction of the foreign currency trading auction system, tight fiscal and monetary policies.

This has reflected a sustained decline in the rate of inflation, which peaked at a post dollarisation high of 837,6 percent in 2020, but fell to 106,6 percent last month. It was expected public debt would end this year at $1,9 trillion.

Last week, the Cabinet also adopted the statement on 2021 mid-year fiscal policy and economic review, balance of payment developments as well as state of the financial sector and outlook, presented by Minister Ncube.

Information, Publicity and Broadcasting Services Minister Monica Mutsvangwa said last week the budget review will also see Minister Ncube present the 2022 National Budget strategy paper for 2022, which he has already presented to and has been approved by Cabinet.

“The 2022 Budget Strategy Paper is part of the annual budget preparatory process issued in order for stakeholders to understand macro-fiscal issues that will guide prioritisation of budget allocations,” she said.

In terms of the strategy paper, the Zimbabwean economy is projected to grow by 5,4 percent in 2022, anchored on growth in mining, manufacturing and electricity generation, among others.

Government revenue is expected to improve from 16,4 percent ($390,8 billion) of the gross domestic product (GDP) in 2021 to 17, and 8 percent ($533, 2 billion) in the coming year.

On the other hand, expenditure is anticipated to increase to 19,4 percent ($579,1 billion) of total national economic output next year from the 18,2 percent ($421,6 billion) in 2021.

In the 2022 budget, the Government will prioritise sustaining macroeconomic stability, for conducive business and investment conditions and to improve the living standards of citizens.

Priority areas in 2022 will include inclusive growth and macro-economic stability, developing and supporting productive value chains, optimising value in natural resources, infrastructure, ICTs and digital economy.