HARARE, November 26, 2015-FINANCE Minister and Economic Development Minister Patrick Chinamasa said on Thursday the country’s economy would grow by 2,7 percent in 2016, after he rolled out measures aimed at addressing a deepening economic crisis.
Zimbabwe’s economy is expected to grow by 1,5 percent this year, after initially being projected to grow by 3,5 percent.
Announcing the US$4 billion 2016 National Budget in Harare, Chinamasa said confidence boosting measures taken this year, such as the ongoing Staff Monitored Programme with the International Monetary Fund, reforms to improve the ease of doing business being spearheaded by the Office of the President and Cabinet, and efforts to clear U$1,8 billion of the country’s US$7 billion external debt by June, would help the economy to recover.
He said projected growth in mining, tourism, construction and the financial services sectors would drive growth next year.
Projected revenue in 2016 is expected at US$3,85 billion, which will translate into a budget deficit of US$150 million during the period.
“In 2016, GDP (Gross Domestic Product) growth is projected to rebound to 2,7 percent, mainly on account of mining, tourism, construction and the financial sector,” Chinamasa said.
“Agriculture is expected to recover by 1,8 percent though adequate planning on mitigating the impact of the El-Nino weather will be essential. The successful resolution of Zimbabwe’s external payment arrears is expected to disseminate positive signals to investors and lenders. In this regard, the perceived country risk premium that has made credit lines to Zimbabwe unaffordable should be reduced significantly.
“As a result, the country should be able to access credit lines at competitive rates, a development that would positively impact on the cost of doing business in Zimbabwe,” he said.
Zimbabwe tabled a debt clearance plan with key international creditors during the World Bank and IMF meetings in Peru in September, where it undertook to repay the US$1,8 billion by the end of June 2016.
This is expected to open the door for further negotiations with other creditors.
Zimbabwe had last serviced its debts in 1999.
Chinamasa allocated the bulk of resources to Education, Health, Defence and social services, which will consume a combined 82 percent of the budget.
Primary and secondary education was allocated US$810 million, the Ministry of Home Affairs was given US$383 million, the Ministry of Defence took US$357 million and the Ministry of Health and Child Care was allocated US$330,7 million.
The 2016 National Budget, however, failed to tackle recurrent expenditure, which is projected to chew about 93 percent of the envelope, leaving very little for growth-stimulating capital expenditure.
- Economy seen growing by 2.7 percent in 2016 VS 1.5 percent in 2015
- Inflation to average -1.2 percent in 2016
- Total budget envelope for 2016 at $4 billion
- Recurrent expenditure, at $3.685 billion, is 92.1 percent of budget
- Revenue projected at $3.85bn in 2016, $150 million deficit (1.1pct of GDP) to be funded through local borrowings
- Finance Minister pins hope for economic recovery on re-engagement with international lenders
- Education gets biggest share of budget, $810 million, while home affairs ($396mln) and defence ($357mln) get a combined 19pct of budget
- Health allocated $330 million in the 2016 budget
- Government wage bill seen at $3.919 billion in 2016
- Streamlining of the wage bill, mainly targeting youth officers, agricultural extension workers, non-payment of salaries to teachers at non-government schools and reduction of student teacher allowances, set to save $14.2 million monthly or $170mln annually
- Civil service employment figures, minus army establishment, jump 36pct since dollarization, from 203,000 in 2009 to 276,000 in 2014.
- Exports are expected to grow to $3,7 billion next year from $3,4 this year
- Imports projected to decline marginally from $6,3 billion in 2015 to $6,2bn next year.
- Gold production to reach 20.1 tonnes in 2016, VS 18.7 tonnes in 2015 and still below all-time high of 29t in 1999
- Royalties on gold reduced to 3pct from 5pct
- Government to take over Ziscosteel’s debt and lay off all workers, new investor sought after collapse of Essar deal