Finance minister Patrick Chinamasa has projected the economy to grow by 1,7% next year buoyed by growth in agriculture and mining.
Source: Economy to grow by 1,7% in 2017: Chinamasa – NewsDay Zimbabwe December 9, 2016
BY VICTORIA MTOMBA
Presenting the $4,1 billion 2017 national budget yesterday, Chinamasa said the economy was projected to grow by 0,6% this year but would improve next year.
“In 2017, the economy is set to turn around from the slowdown mode to modest growth led by key sectors of mining and agriculture, benefitting from the anticipated normal to above normal rainfall. Overall GDP growth is, therefore, projected at a moderate 1,7% in 2017, also against the background of anticipated moderate improvements in international commodity prices, fruition of planned mining investments and benefits from the ease of doing business reforms,” he said.
The growth projection is a sober one after Treasury had earlier forecast a growth rate of 4,8% in its strategic paper.
Revenue will be $3,7 billion leaving a financing gap of $400 million, Chinamasa said.
“The fiscal framework of revenue collections of $3,7 billion and projected expenditures of $4,1 billion presents a financing gap of about $400 million, which is 2,7% of GDP, for the proposed 2017 budget,” Chinamasa said.
The 2016 financing gap had been projected to be $150 million. Chinamasa said the projected financing gap in 2017 would be an improvement on the anticipated 2016 unsustainable financing gap of $1,18 billion outturn, given projected total revenues of $3,53 billion, against anticipated expenditures of $4,59 billion.
Employment costs would take $3 billion, leaving $400 million for current operations and $180 million for debt services out of the overall proposal for recurrent expenditures of $3,58 billion.
Capital expenditure will have $520 million, which is 14% of total revenues from the national budget. Chinamasa said the desired levels for capital expenditure on the capital budget for implementation of ZimAsset project was $5,4 billion.
“The 2017 budget provision of $3 billion for employment costs represents decline from the estimated outturn of $3,14 billion to year end 2016. The anticipated lower provision on employment costs by an estimated $140 million is reflective of financial savings arising from the implementation of the Public Service Wage Bill rationalisation measures,” he said.
Chinamasa said a severe drought, for the second consecutive year, had a heavy toll on agriculture production, with some crops, such as maize, recording merely 511 000 tonnes, against the average national requirement of 1 800 000 tonnes, resulting in a huge import bill for the country. Consequently, agriculture recorded a growth decline of -3,7% in 2016. However, in 2017, Chinamasa said agriculture was projected to grow by 12% driven by higher output from major crops such as maize, cotton and tobacco, as well as milk production.
He said the country needed to gradually revert back to the cash budgeting framework tenets, through ensuring that all line ministries adhere to allocations and spend as and when resources are available.
Chinamasa proposed a moratorium on Treasury bill issuances and confining borrowing at concessional rates from external sources for development programmes. The government has been resorting to issuing Treasury Bills to finance the gap caused by the mismatch between revenue and expenditure.
“In tandem with the above, government will also start addressing the fiscal gap through a number of expenditure management measures backed by revenue increasing interventions anchored on stimulation of production,” he said.
Chinamasa said the country would next year clear its arrears with other multilateral creditors such as the African Development Bank ($610 million), the World Bank ($1,16 billion), the European Investment Bank ($212 million) and other multilateral institutions as well as bilateral official creditors, after it cleared its $108 million debt with the International Monetary Fund.
Commenting on the budget, former Finance minister Tendai Biti said one cannot expect to get different results from the same figures. For instance, this year’s budget was projected at $4 billion and the growth projects were revised to 0,6% by Chinamasa.
Biti rapped the proposal to levy 5 cents for every dollar on airtime and data to finance the health fund.
“It has nothing to do with health. it’s a fundraising initiative. Government can have a proper health care that should work, not these levies, which are punitive. This is a political move to push people away from social media that has been against this regime,” he said.
Biti said the country was in a recession and heading towards economic depression and it required a fundamental shift with major cost cutting measures.