Zimbabwe heads towards $1,82bn deficit

10 Nov, 2017 - 00:11 0 Views
Zimbabwe heads towards $1,82bn deficit Minister Chombo

eBusiness Weekly

Business Writer
Zimbabwe is expected to close the year with a budget deficit of $1.82 billion as the government struggles to rein in its expenditure, Finance and Economic DevelopmentMinister Dr Ignatius Chombo has said.

Dr Chombo, who was thrown into the hot seat of finance in last month’s cabinet reshuffle, is due to present his maiden national budget on November 23 this year.
Addressing legislators attending a 2018 pre-budget meeting, Dr Chombo said drought, employment costs, by-elections, debt servicing and emergency responses to Cyclone Dineo drove government expenditure during the year.

As a result, the government was projecting that its expenditure would reach $5.582 billion at the end of the year against the budgeted $4.1 billion. On the 2017 National Budget performance, cumulative revenue collections are estimated to reach $3,9 billion by end of December against a target of $3,7 billion.

This represents an 11,4 percent increase from previous year’s collections of $3,502 billion.
In terms of revenue heads contributions, Value Added Tax continued to lead at 28 percent, followed by Pay as You Earn (PAYE) at 19 percent, and Excise Duty at 18 percent.

Dr Chombo said while revenues performed well above target, expenditures were under pressure from drought, employment costs, by-elections, debt servicing and emergency responses to Cyclone Dineo. As a result, expenditures stood at $3,33 billion, against a target of $3,11 billion, between January and September 2017.

Budget disbursements towards recurrent expenditure for the period to September 2017 amounted to $2,97 billion, against planned disbursements of $2,7 billion. This resulted in disbursement overruns of $270 million. On the contrary, expenditures under the Development Budget under-performed by $54,1 million during the same period.

“This situation has meant deferring implementation of a number of Zim Asset priority projects and programmes that are necessary for us to accelerate economic growth and development,” said Dr Chombo.

In the outlook to December, cumulative expenditures are projected to reach $5,582 billion, up from the budgeted $4,1 billion. In tandem with improved GDP growth, exports for the period September 2017 were on the increase and stood at $2,6 billion, against $1,8 billion of 2016. This translates into a 44 percent increase.

With Imports estimated at $4 billion, Dr Chombo said the trade deficit narrowed to $1,5 billion, from $2 billion recorded in same period of 2016.

“The improvement in the trade balance is on account of import management measures instituted by Government, reduction in food imports and improved availability of locally produced goods,” he said.

Minister Chombo said adherence to fiscal anchors is meant to support the goal of restoring fiscal discipline and economic stability.
He said fiscal discipline will also provide clearer guidance to other Ministries on what they can spend.

“Consistent with this stance, I am proposing to contain the Budget deficit to levels consistent with the total available domestic and external financing, without resorting to either Reserve Bank borrowing or payment in Treasury Bills,” said Dr Chombo.

In line with the investment thrust, Dr Chombo said the 2018 Budget also seeks to create a conducive domestic investment environment, targeting both local and foreign investors.

He said his Ministry is making the necessary review to align the Indigenisation and Economic Empowerment Act, with the clarifications by President Robert Mugabe.
“Other interventions are geared at improving the business environment and efficiency, such as the ‘Ease and Cost of Doing Business Reforms’, will be pursued as integral supportive measures to the 2018 Budget,” said Dr Chombo.

He said they will pursue the re-engagement process with international financial institutions, in particular the World Bank and the African Development Bank with a view of clearing arrears, a situation expected to unlock external financing needed for complementing internally generated resources.

Dr Chombo said Government will continue to engage cooperating partners who complement Government’s economic blueprint, Zimbabwe Agenda for Sustainable Socio Economic Transformation initiatives.

Dr Chombo said in 2018, overall economic growth is anticipated at 3 percent. The growth is expected to be driven by agriculture, mining, construction, tourism, ICT, as well as the services sector.

Revenues are still projected at $4 billion, meaning the country’s national budget will remain around $4 billion for many years to come, supported by key sectors of agriculture, mining, construction, tourism, ICT, as well as services.

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