Bullish government upgrades 2021 growth outlook

The upward projection mirrors the stance taken by the Bretton Woods Institutions, World Bank and the International Monetary Fund (IMF).

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HARARE – Thanks to a booming agriculture industry on the back of favourable rain patterns, growth in mining, manufacturing and electricity sectors, Zimbabwe has upgraded this year’s growth forecast and pledged to support economic stability experienced in the economy.

Gross domestic product is expected to expand 7.8% in 2021 up from an initial projection of 7.4%, the Minister of Finance and Economic Development Professor Mthuli Ncube said in a mid-term budget review statement presentation this Thursday.

This represents a recovery from an average contraction of 9% in the previous year.

The upward projection mirrors the stance taken by the Bretton Woods Institutions, World Bank and the International Monetary Fund (IMF). The IMF recently reviewed the country’s GDP growth forecasts to 6% from 3.1% after it had initially reviewed downwards from 4.3%.

To quote what the Minister said, “There is need to stay on course,” he demonstrated that government is satisfied with the current economic course by not introducing any changes to the 2021 budget allocations.

In a comment Equity Axis’ Economic Analyst Zvikomborero Sibanda said, “I was expecting a supplementary budget to cater for vaccines procurement since we’re targeting to achieve herd immunity by year-end.”

“Also, I was expecting the Minister to clear the air on the source of funding for the purchase of grains by the Grain Marketing Board (GMB) which is at the excess of ZWL60 billion.”

Overall expenditures during the period January to June 2021 stood at ZWL$197.6 billion, implying expenditures were above the half-year target of ZWL$189.8 billion by ZWL$7.8 billion.

Minister Ncube highlighted that major expenditures were on Compensation of Employees at ZWL$80 billion against a target of ZWL$73.8 billion and Non-Financial Assets (capital budget) at ZWL$67.4 billion against a target of ZWL$58 billion.

Social benefits and subsidies stood at ZWL$14.5 billion and ZWL$2.9 billion, against the half-year targets of ZWL$6.1 billion and ZWL$1.4 billion, respectively.

Meanwhile, Minister Ncube pledged government’s commitment to clear debts, especially to the Paris Club. As at the end of December 2020, total Public and Publicly Guaranteed external debt including RBZ external guaranteed debt amounted to US$10.5 billion, representing 71.2% of GDP. External debt arrears alone make up over US$6.5 billion (77%) of total external debt.

Treasury, in March 2021, resumed quarterly token payments to the Multilateral Development Banks (MDBs), the World Bank Group, the African Development Bank Group and the European Investment Bank.

“Token payments are part of the re-engagement process with the International Community in line with the Arrears Clearance and Debt Relief Strategy which is critical in regaining access to concessional financing from both multilateral and bilateral development partners,” said Professor Ncube.

“Payments to Paris Club Creditors will also begin in the second half of 2021.”

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