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Zimbabwe revises downwards growth forecast for 2018

Staff Writer |
Zimbabwe revised downwards its growth forecast for 2018 to 4 percent from 6.3 percent previously projected due to economic headwinds in the second quarter of the year.

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Presenting his maiden budget statement for 2019 in parliament, Finance Minister Mthuli Ncube said the economy will also grow by 3.1 percent in 2019, down from the initially projected 9 percent due to previous macro fiscal vulnerabilities and a drought that is expected in the 2018/19 agricultural season.

However, fiscal consolidation measures beginning 2019 are expected to give a strong rebound in economic growth to above 7 percent from 2020, he said.

Zimbabwe, he said, was expecting to get 606.7 million U.S. dollars from development partners in 2019, with 453.4 million coming from bilateral partners and the remainder from multilateral partners.

He said the main focus of the budget, themed "austerity for prosperity," is to stabilize the economy and focus on quick wins to stimulate growth and job creation so that the country remains on track to achieving its long-term goal of becoming a middle income economy by 2030.

Ncube said the government will tighten its expenditure to curb budget deficit which, together with current account deficit, rising inflation and foreign currency shortages has become major sources of economic vulnerabilities.

He said budget deficit will close the year at 11 percent of Gross Domestic Product, higher than previously projected but will gradually fall to 5 percent in 2019, 4 percent in 2020 and 3 percent in 2021.

Ncube said to reduce expenditure, the government will with effect from January 2019 weed out all ghost workers in the civil service through introduction of bio metric registration for all civil servants, impose a 5 percent salary cut on basic salaries of senior government employees and reduce the country's foreign missions, among other cost-cutting measures.

Central bank quasi activities that have also imposed a strain on the fiscus will be discontinued, Ncube said.

He, however, said civil servants will get their bonus payments this year despite the constrained fiscal space although the reward will be based on basic instead of gross salaries.

"The 2019 budget places emphasis on living within our means by instilling fiscal discipline and rationalizing expenditures in order to create additional financial capacity for funding developmental expenditures and enhancing delivery of public services," Ncube said.

He said Zimbabwe's GDP had grown 40 percent bigger to 24.6 billion U.S. dollars from 21 billion dollars after a rebasing exercise last month.

Following rebasing, the country's per capita GDP for 2017 rose from 1,235 dollars to 1,508 and was being projected to end 2018 at 1,642, thus placing Zimbabwe in lower middle income status, the minister said.

He said revenue collection amounting to 5.3 billion dollars is anticipated in 2018, against estimated expenditure of 8.2 billion thus giving an expenditure overrun of 2.8 billion dollars or 11 percent of GDP.

The minister introduced a raft of revenue enhancing measures including a requirement for customs duty on imported individual motor vehicles to be paid in foreign currency with effect from Nov. 23, 2018.

He also introduced a 7 cents excise duty per liter of diesel and 6.5 cents per liter of petrol.

The minister said the government had set aside 53 million dollars in the 2019 budget for payment of compensation to former white commercial farmers whose land was repossessed by government during the land reform program.

In view of progress made by platinum miners to set up beneficiation plants, the minister deferred the 15 percent tax on exports of unprocessed platinum from Jan. 2019 to Jan. 2022.

Platinum is Zimbabwe's second major foreign exchange earner in mining after gold.

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