Golden Sibanda Senior Business Reporter
FITCH Solutions, a leading economic research firm, which is part of reputable global credit rating agency Fitch Ratings, believes President Mnangagwa will make progress in reintegrating Zimbabwe into the global community, but says the process may take a little longer than desired.
Fitch believes reopening lines of credit will take a track record of delivering on reform promises before large-scale funds come Zimbabwe’s way and that Government will remain reliant on domestic banks for the bulk of its deficit financing, weighing on liquidity in the banking system and overall economy.
The United States-based leading provider of credit and macroeconomic intelligence, and the primary distributor of the Fitch Ratings content, said President Mnangagwa and his team had made repairing relations with the Western and multilateral institutions a priority.
Fitch Solutions, correctly predicted that elections will be adjudged free and fair and that President Mnangagwa, who garnered 50,67 percent of the votes, would romp to victory in the July 30, harmonised elections.
“Finance Minister Patrick Chinamasa delivered a presentation at the Spring Meetings of the IMF and the World Bank in April where he outlined the Government’s reform plans,” Fitch Solutions noted.
Fitch Solutions also said it retains its view that Zimbabwe’s budget deficit will come in well above the Government’s target in 2018 on the back of higher-than-planned spending and below-target revenue collection.
“The Government announced at the start of May that it had agreed to give civil servants a 10 percent pay hike effective from July 1, which will make plans outlined in the budget to reduce employment costs by 4 percent difficult to achieve,” Fitch Solutions said.
With respect to revenues, Fitch Solutions said it remains convinced that these will come in well below target amid weak economic growth.
“We are forecasting real GDP growth of just 1,9 percent in 2018 as the economy continues to struggle amid tight hard currency liquidity while the crucial agriculture sector, which is the country’s major employer, will be negatively affected by a poor maize crop after late rains.
“Taking the revenue and expenditure outlook together, we forecast that the budget deficit will come in at $1,6 billion (9,3 percent of GDP), well above the 2018 budget target of $672 million,” Fitch Solutions said.