Harare – Finance and Economic Development Minister, Mthuli Ncube on Monday said Zimbabwe's economy is expected to grow by more than six percent against the original Budget projection of 4.5 percent and 4.8 percent estimated for 2017, driven mainly by agriculture and mining.
The new administration led by President Emmerson Mnangagwa is trying to boost the country’s economy after the overthrow of Robert Mugabe in November last year.
Mugabe has been the only leader Zimbabweans had known since the country attained independence from Britain in 1980 and his long rule has seen the country plunge from a jewel of the continent to a basket case while his party evolved from a strong former liberation movement to an outfit that was tottering under deadly factional fights.
Addressing delegates and members of media in the capital on Monday after the presentation of the Monetary Policy Statement, Ncube said the economy is showing signs of recovery albeit with a number of challenges and risks.
“Indications are that, the economy will grow by 6.3 percent against the original Budget projection of 4.5 percent and 4.8 percent estimated for 2017.
“With this projected growth Zimbabwe will join the “6 percent club” of African countries growing at more than 6 percent per annum.
However, Ncube said the quality of the growth, which is primarily being driven by two sectors of agriculture and mining is obviously not inclusive.
“Moreso, the growth trajectory faces risks and challenges which are related but not limited to foreign currency and cash shortages, unsustainable high budget and current account deficits, emerging inflation pressures, slow moving re-engagement process; infrastructure deficiencies; and weak social service delivery.
“These challenges are however not insurmountable. These challenges call for urgent reforms. It cannot be business as usual. Bold decisions need to be taken on the reforms front in order to stimulate growth and sustainable development.
“At the centre of the above challenges, is the unsustainable high budget deficit. This challenge has had destabilising implications not “only to the financial sector but to the rest of the economy.”
The Finance minister said the financing of the deficit was mainly through domestic borrowing with the use of instruments such as Treasury bills, overdraft with the Central Bank, cash advances from Central Bank, arrears and loans from the private sector.
“Such financing mechanisms is crowding out the private sector, hence constraining production. This also increased money supply in the economy translating into exchange rate misalignment and inflationary pressures now at 4.9 percent, as at August 2018.”
Similarly, the high deficit has ignited expansion of domestic debt from US$275.8 million in 2012 to current levels of US$9.5 billion against US$7.4 billion external debt.
This brings total public debt to US$16.9 billion.
Ncube said treasury is accelerating the process of re-engagement with international partners and creditors in order to clear arrears on external debt.
“Following the roadmap developed in Lima, Treasury is in dialogue with the international financial institutions who are our creditors, seeking to eventually clear the US$2.5 billion owed to the African Development Bank, the World Bank and the European Investment Bank.
“Simultaneously, Treasury is engaging key Paris Club creditors with a view to restructuring US$2.8 billion owed to them. Such debt resolution will help restore the international credit standing of Zimbabwe, resulting in improved access to new external credit lines and investment flows,” he said adding that negotiation on this process will continue at the WB/IMF Annual Meeting in Bali, Indonesia from 10 – 14 October 2018.
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